Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-87-02288/USCOURTS-ca10-87-02288-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

---

.·. PUBLISH 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

TRI-STATE GENERATION AND TRANSMISSION ) 

ASSOCIATION, INC., ) 

) 

Plaintiff-Appellant, ) 

) 

and ) 

) 

UNITED STATES OF AMERICA, ) 

) 

Plaintiff-Intervenor-Appellant, ) 

) 

V • ) 

) 

SHOSHONE RIVER POWER, INC., a Wyoming ) 

corporation, et al., ) 

) 

Defendants-Appellees. ) 

No. 87-2288 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF WYOMING 

(D.C. No. C85-488-K) 

M.l\Y 

Michael A. Williams of Sherman & Howard, Denver, Colorado, and 

Diane Marshall Ennist of the Civil Division, Department of 

Justice, Washington, D.C. (Robert E. Youle, Edward A. Gleason, and 

Leanne B. De Vos of Sherman & Howard, Denver, Colorado; Richard K. 

Willard, J. Christopher Kohn, Sandra P. Spooner, and Larry R. 

Steffes of the Civil Division, Department of Justice, Washington, 

D.C.; and James L. Applegate of Hirst & Applegate, P.C., Cheyenne, 

Wyoming, with them on the briefs), for Plaintiff-Appellant and 

Plaintiff-Intervenor-Appellant. 

Stephen S. Walters of Stole, Rives, Boley, Jones & Grey, Portland, 

Oregon (Roy Pulvers and Mark J. Fucile of Stole, Rives, Boley, 

Jones & Grey, Portland, Oregon; Stanley K. Hathaway of Hathaway, 

Speight, Kunz, Trautwein & Barrett, Cheyenne, Wyoming; Robert D. 

Olson of Geppert, Olson & Guill, Cody, Wyoming; and C. Edward 

Webster II, Cody,- Wyoming, with him on th~ brief-)_, for--DefendantsAppellees. 

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 1 
Before McKAY, SEYMOUR, and BALDOCK, Circuit Judges. 

McKAY, Circuit Judge. 

I. Background 

The background of this case is detailed in our previous opinion, reported at Tri-State Generation & Transmission Association, 

Inc. v. Shoshone River Power, Inc., 805 F.2d 351 (10th Cir. 1986) 

[hereinafter Shoshone I], which considered Tri-State Generation 

and Transmission Association, Inc.'s (Tri-State's) appeal from the 

district court's dissolution of the preliminary injunction in this 

case. We highlight portions of the background for purposes of 

this appeal as follows. 

In 1936 Congress enacted the Rural Electrification Act, 7 

U.S.C. §§ 901-950b (1982 & Supp. 1986), which instituted a program 

designed to provide electric power to rural America. Apparently, 

Congress was concerned with the fact that those then engaged in 

the business of generating electrical energy had f~iled to extend 

electric service to the rural communities of America and determined that the national interest would be served by subsidizing 

the rural user of electricity. The Rural Electrification Act created the Rural Electrification Administration (REA) and authorized 

the. REA. to .make and guarantee_ ... loans. that would enable rural 

-2-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 2 
.conununi ties to obtain electric power. 

In response to the Rural Electrification Act, rural conununities across America formed nonprofit electric distribution cooperatives. In 1942 individuals from Park County, Wyoming, organized 

a distribution cooperative, Shoshone River Power, Inc. (Shoshone). 

Basically, the consumers of electric power within the geographic 

area served by Shoshone are the members of Shoshone. 

After REA-financed distribution cooperatives such as Shoshone 

were formed, groups of cooperatives banded together to form central generation and transmission cooperatives (G&Ts). 1 This 

second-level cooperative formation stenuned from an effort on the 

part of the distribution cooperatives to secure and more economically obtain a long-term source of power. 

In 1952 distribution cooperatives in Colorado, Nebraska, and 

Wyoming formed a central G&T, Tri-State, to be "operated on a 

cooperative, non-profit basis for the mutual benefit of its 

members. 112 Record, vol. 1, doc. 86, exh. A (Articles of 

1 Upper Missouri G & T Electric Cooperative, Inc. v. McCone 

Electric Co-op, Inc., 160 Mont. 498, 503 P.2d 1001 (1972), details 

the banding together of a group of electric distribution 

cooperatives to form a central generation and transmission 

cooperative in order to secure a long-term source of power to 

avert a power shortage. 

2 Likewise, the preamble to Tri-State's Articles of 

Incorporation. states that- the members "voluntarily associate 

[themselves] together for the purpose of forming" Tri-State. 

Article II provides further that Tri-State was established by the 

members in part to generate and acquire electric energy for the 

-3-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 3 
Incorporation, art. IV; Bylaws, art. VII, § 1). Specifically, 

Tri-State was organized for the purpose of furnishing long-term 

wholesale power and energy to its member distribution cooperatives 

who, in turn, funnel the power to their consuming members. Tristate is comprised of its member distribution cooperatives which • 

are comprised of the actual consumers of the electric power. 

Although not one of the original distribution cooperatives 

. . forming Tri-State, Shoshone became a member of Tri-State in 1958. 

Like all member distribution cooperatives, Shoshone entered into a 

long-term wholesale power contract (the all-requirements contract) 

with Tri-State for electric service. In general, the all-requirements contract provides that Tri-State would sell and deliver to 

Shoshone, and Shoshone would purchase and receive from Tri-State, 

all electric power and energy which Shoshone would require for the 

operation of its system. The contract secures a long-term source 

of power for Shoshone, assures a stable market for the power produced by Tri-State, and provides a long-term revenue stream with 

which Tri-State could repay obligations incurred by it on behalf 

of its members. 

Shoshone initially agreed that the all-requirements contract 

would remain in effect for a term of thirty-three years--until 

December 31, 1991. On June 23, 1965, the contract was replaced by 

members only. Article II authorizes Tri-State to sell energy to 

nonmembers for the~ultimate benefit of its members and to 

construct facilities to carry out its objectives. 

-4-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 4 
a similar all-requirements contract, under which Shoshone agreed 

to extend the term of the contract to December 31, 2005. This 

1965 contract recites that Tri-State proposed to construct an 

electric generating plant or transmission system, or both, and 

that Tri-State would enter into similar all-requirements contracts 

for electric power with all member distribution cooperatives. The 

contract also provides that the rate for electric power charged to 

Shoshone, along with the other member distribution cooperatives, 

could be revised so that the revenues produced from the allrequirements contracts and other sources would be sufficient to 

meet the costs of operating and maintaining Tri-State's system and 

sufficient to make payments on all of Tri-State's indebtedness. 

The 1965 contract was subsequently modified, Shoshone agreeing 

most recently in 1977 to extend the term of the contract to 

December 31, 2020. 

Getting electric power out to the rural communities was obviously an expensive task. The REA program and formation of central 

G&Ts made it possible for rural communities to obtain the needed 

help and financial aid. With the all-requirements contracts in 

place, the G&T system provided a stable, interdependent network 

whereby the distribution cooperatives could pool their resources 

and band together to obtain power at wholesale prices, build central facilities, obtain favorable loans, and attempt to keep costs 

down. In this respect, notwithstanding a G&T's low equity ratio, 3 

3 Rather than having to build its equity, a G&T is able to 

operate on a very small margin, thereby passing the savings on to 

its members. Normally, a highly leveraged company is a credit 

-5-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 5 
it is clear from the record that REA has been willing and authorized to provide and guarantee favorable long-term, low-interest 

loans to G&Ts inasmuch as REA is able to look to the revenue 

stream under the all-requirements contracts as an assured source 

of repayment and security for the loans 4 and as an essential factor to the cohesiveness and financi~l strength of the G&T systems. 

Effectually, then, the all-requirements contracts place the financial strength of the distribution cooperatives behind G&T loans. 

Initially, Tri-State operated as a paper G&T; it owned no 

generation facilities and acted mainly as a pooling agent to manage more efficiently its members' power allocations. Later, during the 1960's, the member distribution cooperatives anticipated 

substantial future growth in demand for electricity and projected 

increased needs. The record is clear that in response to its members' power requirement forecasts and to avert a possible power 

shortage, Tri-State built generation and transmission facilities, 

risk and must pay premium interest rates, if it is able to borrow 

at all. Because all-requirements contracts allow the REA and the 

financial market to view G&Ts and their member distribution 

cooperatives as an integrated whole, reasonable and necessary 

financing can be made available to G&Ts despite the small equity 

margin. 

4 To make loans to G&Ts for the purpose of financing the 

construction and operation of generating plants and electric 

transmission and distribution lines or systems for the furnishing 

of electric energy to rural communities, ·REA must first determine 

that the security for the loan is ''reasonably adequate" and that 

the loan will be repaid within the time agreed. 7 u.s.c. § 904 

(1982). It cannot be seriously disputed that the all-requirements 

contracts within the G&T systems provide-an essential source of 11 reasonably adequate" security for the REA loans. 

-6-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 6 
obtaining REA loans and REA-guaranteed loans to .do so. The terms 

of Tri-State's all-requirements contracts with its member distribution cooperatives were extended to match the payment periods of 

the loans taken out by Tri-State. The record is clear that REA 

required extensions and the member distribution cooperatives 

agreed to the extensions so that Tri-State could obtain loans to 

build the facilities for its members' benefit. 

After Tri-State built facilities, made substantial capital 

outlays, incurred debt, and expended funds on behalf of its members, economic conditions changed. The projected growth in demand 

failed to materialize, and there was an oversupply of electric 

power. In the early 1980's, Tri-State, like other G&Ts, found 

itself with stagnant demand, excess capacity, enormous debts to be 

repaid, and increasing rates being charged to its members. 

In October 1985, Shoshone entered into a Memorandum of Understanding with PacifiCorp dba Pacific Power & Light Company 

(Pacific), an investor-owned utility. Pursuant to the Memorandum 

of Understanding, Pacific offered to purchase stibstantially all of 

Shoshone's assets, which include the power-delivery subscriptions 

of Shoshone's members and some poles and power lines. The sale 

was subsequently approved by Shoshone's members. 

Tri-State brought this action to recover monetary damages and 

enjoin the sale of Shoshone's. assets ~o Pacific.· Tri-State 

claims, among other things, that it is a breach of Shoshone's 

-7-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 7 
obligations under the all-requirements contract to sell its assets 

to Pacific without making provision for the purchase of electric 

power from Tri-State throughout the remaining term of the contract. Shoshone, on the other hand, claims that selling its 

assets and ceasing business do not breach its obligations under 

the all-requirements contract because a sale, which is not 

expressly prohibited under the contract, would eliminate any power 

requirement Shoshone may have had under the contract. 

REA intervened as a plaintiff in this action, subsequently 

claiming that it would be irreparably damaged if Shoshone is 

allowed to sell its assets to Pacific. 5 REA sought injunctive 

relief. 

Prior to trial, the parties filed cross motions for partial 

summary judgment, seeking interpretation of the all-requirements 

contract. The district court granted a portion of Pacific's and 

Shoshone's motion, ruling that under the contract Shoshone is not 

required to remain in business or otherwise to purchase power from 

Tri-State throughout the term of the contract. Rather, according 

to the district court, Shoshone breaches its contractual obligations only if it eliminates its requirements and ceases business 

in bad faith. 

5 In an order dated April 17, 1987, the district court 

.determined on.cross motions for partial summary judgment that 

is a third-party beneficiary of the all-requirements contract 

between Tri-State and Shoshone. 

-8-

REA 

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 8 
A jury trial was held in April.and May, 1987. The jury 

returned a verdict in Tri-State's favor on every issue, finding, 

among other things, that Shoshone had breached its implied obligation of good faith and fair dealing and was estopped from selling 

its assets and going out of business. The jury awarded damages 

totaling $37 million. The district court ordered Tri-State to 

remit $31 million of the jury's award or face a new trial. After 

Tri-State declined to file a remittitur, the district court set 

aside the jury's verdict and granted Shoshone's and Pacific's 

motion for a new trial on all issues. The district court also 

denied Tri-State's and REA's request for a permanent injunction. 

Tri-State and REA appeal the district court's order denying 

their request for a permanent injunction. They also appeal the 

district court's order ruling on the parties' cross motions for 

partial summary judgment regarding the proper interpretation of 

the all-requirements contract and the need for REA approval and 

the district court's orders ruling on post-trial motions and 

granting a new trial on all issues. 

II. Jurisdiction 

We must first determine whether or not we have jurisdiction 

to hear this appeal and, if so, the scope of that jurisdiction. 

As a general rule, only final decisions of the district courts are 

appealable. 28 u.s.c. § 1291 (1982). A statutory exception to 

the finality rule is set forth in 28 U.S.C. § 1292(a)(l) (1982), __ 

which provides that courts of appeals shall have jurisdiction of 

-9-. 

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 9 
appeals from interlocutory orders "granting, continuing, modj.fying, refusing or dissolving injunctions .••• " 

Tri-State and REA appeal the district court's order which 

expressly denies their request for a permanent injunction. 

Although the order is interlocutory, 6 it is appealable under section 1292(a)(l) and reviewable at this stage of the proceedings. 

Section 1292(a)(l) thus provides us with jurisdiction to hear this 

appeal. 

We agree with the Eleventh Circuit in Cable Holdings of 

Battlefield, Inc. v. Cooke, 764 F.2d 1466, 1471 (11th Cir. 1985), 

that an interlocutory order expressly granting or denying injunctive relief fits squarely within the plain language of section 

1292(a)(l). Cases such as Carson v. American Brands, Inc., 450 

U.S. 79, 84 (1981), and Stringfellow v. Concerned Neighbors in 

Action, 107 s. Ct. 1177, 1183-84 (1987), which require an additional showing that the interlocutory order might have a "serious, 

perhaps irreparable, consequence" and that the order can be 

"effectually challenged" only by immediate appeal, are inapposite. 

Carson and its progeny do not deal with interlocutory orders that 

explicitly deny or grant a motion for injunctive relief but with 

6 The district court's order expressly denying Tri-State's and 

REA's request for a permanent injunction is not a final order 

inasmuch as the district court ordered a new trial. The district 

court has not directed the entry of a final judgm~nt pursuant to 

Rule 54(b) of the Federal Rules of Civil Procedure, nor has the 

court cErtified any order for interlocutory appeal pursuant to 28 

U.S.C. § 1292(b) (1982 & Supp. 1985). 

-10-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 10 
orders.that have ''the practical effect of refusing an injunction." 

Carson, 450 U.S. at 84; see I.A.M. National Pension Fund Benefit 

Plan Av. Cooper Industries, Inc., 789 F.2d 21, 24 n.3 (D.C. Cir.) 

("Carson does not apply to an order clearly granting or denying a 

specific request for injunctive relief; such orders are always 

appealable under§ 1292(a)(l)."), cert. denied, 107 S. Ct. 473 

(1986); 16 C. Wright, A. Miller, E. Cooper, E. Gressman, Federal 

Practice and Procedure§ 3924 (1977 & Supp. 1987) [hereinafter 

Wright & Miller]. When an order, although not expressly denying 

or granting an injunction, has the practical effect of doing so, 

the Carson line of cases extends the coverage of section 

1292(a)(l) and allows the order to be appealable under that section, but only if the additional requirements are satisfied. 

Tri-State and REA have also attempted to appeal other interlocutory orders of the district court under the doctrine of pendent appellate jurisdiction, including an order ruling on cross 

motions for partial summary judgment and orders ruling on posttrial motions and granting a new trial. First, we are convinced 

that all reasons underlying the district court's denial of the 

injunction are reviewable at this time as a matter of law. See, 

~, Takeda v. Northwestern National Life Insurance Co., 765 F.2d 

815, 818 (9th Cir. 1985); Cable Holdings, 764 F.2d at 1472; Sierra 

On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1421 (9th 

Cir. 1984) ("We have power ..• to review all issues underlying 

an injunction."); .Gould v. Control Laser Corp., 650 F.2d 617, 621 

-11-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 11 
.n.7 (5th.Cir. Unit B.July 1981); Energy Action Educational Foundation v. Andrus, 654 F.2d 735, 745-46 n.54 (D.C. Cir. 1980), rev'd 

on other grounds sub nom. Watt v. Energy Action Educational Foundation, 454 U.S. 151 (1981); Wright & Miller, supra p. 11, § 3921, 

a~ 17, 23. Obviously, if we did not have appellate jurisdiction 

to review matters of law addressed by the district court in its 

order denying injuncti~e relief, this court could not properly 

exercise its jurisdiction under section 1292(a)(l) and resolve the 

issues pertinent to the permanent injunction claim. 

We further believe that on appeal from a grant or denial of 

injunctive relief, this court as a matter of _law may justifiably, 

though cautiously, decide other generally nonappealable legal 

issues. See,~, Thornburgh v. American College of Obstetricians and Gynecologists, 476 U.S. 747, 755-57 (1986) (court of 

appeals' decision to review applicable law and address merits of 

the case on appeal from preliminary injunction was proper); 

Deckert v. Independence Shares Corp., 311 U.S. 282, 287 (1940) 

(extending appellate jurisdiction to an order denying motions to 

dismiss when appeal of a preliminary injunction ruling was properly before the court); Energy Action, 654 F.2d at 745-46 n.54 

(court can decide issues closely related to the interlocutory 

order on appeal); McNally v. Pulitzer Publishing Co., 532 F.2d 69, 

73-74 (8th Cir.), cert. denied, 429 U.S. 855 (1976); Wright & 

Miller, supra p. 11, § 3921, at 16-25 (suggesting common-sense 

approach to.deciding issues on which further factual development 

is unnecessary). "Jurisdiction of the interlocutory appeal is in 

-12-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 12 
large measure jurisdiction to deal with all aspects of the case 

that have been sufficiently illuminated to enable decision by 

[this court] without further trial court development." Wright & 

Miller, supra p. 11, § 3921, at 17. 

In the district court's denial of Tri-State's and REA's 

request for a permanent injunction, the district court referred to 

and in part relied on its previous order ruling on cross motions 

for partial summary judgment that Shoshone does not have an 

implied obligation to maintain requirements and remain in business. See,~, record, vol. 3, doc. 287, at 18, 20-23. This 

merits determination need not be decided as part of our consideration of the permanent injunction issue because of our determination below that the record presently before us does not support a 

finding of irreparable harm. Nonetheless, we believe that we have 

jurisdiction to review this legal determination inasmuch as it was 

a basis for the district court's determination that the injunctive 

relief sought was overly broad and thus improper. 7 Also, we think 

that in the interest of judicial economy, such review is appropriate to avoid unnecessary litigation and delay. Courts are "not 

required to remand in futility." Thornburgh, 476 U.S. at 757 n.7. 

Indeed, the Supreme Court has s~ated: "[R]eview of interlocutory 

appeals was designed not only to permit the defendant to obtain 

immediate relief but also in certain cases to save the parties the 

7 We note, too, that this case proceeded to trial on the basis 

of the district court's ruling on summary judgment and that the 

district court relied on the evidence presented at the trial in 

denying the injunction. 

-13-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 13 
. ( expense of further litigation." .Id. at 756 (citing Smith v . 

Vulcan Iron Works, 165 U.S. 518, 525 (1897)). We have before us a 

sufficiently complete factual and legal presentation from which to 

address the issues of law decided by the district court on summary 

judgment. We conclude that the issues can be decided without further development of the record and that it would be a waste of 

judicial resources not to review the district court's ruling at 

this time. 

Contrary to Shoshone's and Pacific's contention, United 

States v. Stanley, 107 s. Ct. 3054 (1987), does not preclude this 

court from reviewing the contract issue which was decided on summary judgment and is connected to a determination of the propriety 

of injunctive relief. We note first that Stanley involved an 

appeal from a certified order under 28 U.S.C. § 1292(b) (1982 & 

Supp. 1985) and is inapposite to the present appeal. 8 Also, in 

response to the unique procedural setting in Stanley, the Supreme 

Court simply determined that when an order is certified by the 

district court for immediate appeal, the court of appeals has 

jurisdiction of only that order and cannot review uncertified 

orders. Furthermore, although the issues raised in the orders 

were similar, the district court apparently did not refer to or 

8 Our position that the resolution of the pendent appellate 

jurisdiction issue on an appeal from a certified order is not 

applicable to an appeal from an order granting or denying 

injunctive relief is somewhat confirmed by the fact that the 

Supreme Court in Stanley does not mention Thornburgh, 476 U.S. 

747, decided Dnly a year before Stanley, in which. the Supreme 

Court approved the court of appeals' decision to address the 

merits of the case on appeal from a preliminary injunction. 

-14-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 14 
. ( rely on the uncertified orders in addressing the issues raised in 

the certified order or in arriving at its conclusions. Also, the 

uncertified orders related to claims against the United States; 

and the United States was not even a party to the appeal. 

The line of cases addressing the issue of reviewability of 

nonappealable matters on appeal from a Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541 (1949), collateral order is also 

inapposite to this case. The Cohen collateral order doctrine 

allows for the appealability of a non-final order that finally 

determines a claim completely collateral to the merits of the 

action and not merged into or affected by a final judgment on the 

merits, when review after final judgment would be ineffective. In 

that instance, review is apparently limited to the collateral 

order and does not extend to nonappealable matters. See Abney v. 

United States, 431 U.S. 651 (1977); cf. San Filippo v. United 

States Trust Co., 737 F.2d 246, 255 (2d Cir. 1984) (court exercised discretion to consider otherwise nonappealable issues on 

appeal from a Cohen collateral order because there was sufficient 

overlap in the factors relevant to the appealable and nonappealable issues), cert. denied, 470 U.S. 1035 (1985). Since an order 

appealable unde~ the Cohen collateral order exception is necessarily collateral to the rest of the case, and appeal is only permitted for that very reason, review of unrelated matters or matters 

affecting the merits of the case does not appear to be 

suitable--unlike in. the appeal of an order granting or denying 

injunctive relief. 

-15-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 15 
( We -conclude that we have jurisdiction of Tri-State's and 

REA's appeal of the district court's order denying permanent 

injunctive relief. Also, we choose to exercise our pendent appellate jurisdiction over the matters of law addressed by the district court in its order denying the injunction. This would 

include reviewing the district court's determination on summary 

judgment that Shoshone does not have an implied obligation to 

maintain requirements and remain in business. Other matters, 

including whether or not the district court abused its discretion 

in ordering a remittitur or a new trial, in requiring a new trial 

on all issues, in setting aside the jury's punitive damage award 

against Pacific, or in granting defendant H. David Brannon's 

motion for judgment notwithstanding the verdict, are matters which 

we consider inappropriate for review at this time. Accord Hewitt 

v. B.F. Goodrich Co., 732 F.2d 1554, 1555 n.2 (11th Cir. 1984) 

(appeal of order granting new trial is properly taken after final 

judgment in new trial}; Delano v. Kitch, 663 F.2d 990, 1001 (10th 

Cir. 1981), cert. denied, 456 U.S. 946 (1982). 

III. The District Court's Order Denying Request 

for Permanent Injunction 

A permanent injunction is appropriate when the remedy at law 

is inadequate to compensate the injury sustained. The classic 

remedy for breach of contract is the award of monetary damages. 

However, if damages at law cannot adequately compensate the injury 

sustained from the breach or cannot be reasonably measured, then 

the remedy at law is inadequate and injunctive relief providing 

for specific performance may be appropriate because of irreparable 

-16-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 16 
injury. Cf.-Northern Indiana Public Service Co. v. Carbon County 

Coal Co., 799 F.2d ·265, 279 (7th Cir. 1986); Holly Sugar Corp. v. 

Goshen County Cooperative Beet Growers Association, 725 F.2d 564, 

570 (10th Cir. 1984) ("if damages can compensate [injury sustained,] injunction will not lie"); Blackwelder Furniture Co. v. 

Seilig Manufacturing Co., 550 F.2d 189, 197 (4th Cir. 1977) (quoting Foundry Services, Inc. v. Beneflux Corp., 206 F.2d 214, 216 

(2d Cir. 1953) (Hand, J., concurring)) ("irreparability of harm 

includes the 'impossibility of ascertaining with any accuracy the 

extent of the loss"'); Danielson v. Local 275, Laborers International Union, 479 F.2d 1033, 1037 (2d Cir. 1973) ("Irreparable 

injury is suffered where monetary damages are difficult to ascertain or are inadequate."); Gulf & Western Corp. v. Craftigue Productions, Inc., 523 F. Supp. 603, 607-08 (S.D.N.Y. 1981); Lee v. 

Brown, 357 P.2d 1106, 1110-11 (Wyo. 1960). Injunctive relief, of 

course, is an extraordinary remedy. Kincheloe v. Milatzo, 678 

P.2d 855, 861 (Wyo. 1984). 

Under the circumstances of this case, a permanent injunction 

is appropriate if (1) Shoshone breaches its contractual obligations to Tri-State by selling its assets to Pacific or is estopped 

from eliminating its requirements and ceasing business through the 

term of the all-requirements contract and (2) an award of monetary 

damages is inadequate to compensate Tri-State or REA (as thirdparty beneficiary to the contract) for the injury sustained. 

- Although the granting or refusing of injunctive relief rests in 

the sound discretion of the trial court, accord McKinney v. 

-17-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 17 
Gannett Co., 817 F.2d 659·, 670 (10th. Cir. J.987), the exercise of, 

that discretion is subject to review. Goldammer v. Fay, 326 F.2d 

268, 270 (10th Cir. 1964). 

Based on the evidence presented at trial, the district court 

determined that Tri-State has an adequate remedy at law and is not 

irreparably harmed by a breach of the all-requirements contract. 

The district court also determined that REA's claim of inadequate 

legal remedy and irreparable harm is too speculative to permit the 

issuance of an injunction. Furthermore, according to the district 

court, the injunction sought by Tri-State and REA cannot be 

granted because it would enjoin Shoshone from ever selling its 

assets to Pacific and enjoin Pacific from ever acquiring any Tristate member. The district court premised this determination on 

its previous ruling on summary judgment that Shoshone does not 

have an express or implied obligation under the all-requirements 

contract to maintain requirements and remain in business. 9 Consequently, the district court denied Tri-State's and REA's request 

for injunctive relief. 

9 In its order denying the permanent injunction, the district 

court also referred to and relied on its determination on summary 

judgment that Shoshone does not have to seek REA's approval of the 

sale since Shoshone's direct debts to REA have been paid in full. 

We agree with the district court that the plain language of 7 

U.S.C. § 907 (1982) does not require Shoshone to obtain REA 

approval prior to selling its assets when its direct debts to REA 

are repaid. It is clear from the record that Shoshone is not 

individually liable for any portion of the Tri-State debt owing to 

REA. Public Utility District No. 1 v. United States, 417 F.2d 200 

( 9th Cir. 1969), which involves a unilater·a·1 state condemnation of 

a portion of an REA-financed cooperative system without REA 

approval, is not on point. 

-18-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 18 
Initially, we must determine whether or not the district 

court's premise was correct that Shoshone does not have an obligation to maintain requirements and remain in business. If Shoshone 

has such an obligation, the district court erred in granting summary judgment on that issue in favor of Shoshone and Pacific and 

in relying on that determination in evaluating the propriety of 

permanent injunctive relief. We must then determine whether or 

not the district court clearly erred in concluding that Tri-State 

has an adequate legal remedy and that REA's claim of irreparable 

harm is speculative. If monetary damages cannot adequately compensate Tri-State, or if REA is irreparably harmed, the district 

court abused its discretion in denying injunctive relief. 

A. Shoshone's Implied Contractual Obligation 

"[I]t is well settled that a contract includes not only what 

is stated expressly but also that which of necessity is implied 

from its language." Arch Sellery, Inc. v. Simpson, 360 P.2d 911, 

912 (Wyo. 1961). When a contract is indefinite on a pertinent 

aspect of the parties' contractual relationship, it may be appropriate to search the surrounding circumstances in order to ascertain what the parties contemplated at the time of contracting. 

Accord Mountain Fuel Supply Co. v. Central Engineering & Equipment 

Co., 611 P.2d 863, 868 (Wyo. 1980) (because contract was silent on 

warranty starting date, court examined the surrounding circumstances); Peters Grazing Association v. Legerski, 544 P.2d 449, 

459 (Wyo. 1975) (contract may be "considered in_light of all the 

-19-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 19 
.. surrounding circumstances·,. related facts showing relations of the 

parties, the nature and situation of the subject matter and the 

apparent purpose in making the contract''). "[T]he fundamental 

canon of construction applicable to contracts generally is the 

ascertainment of the intention of the parties." Shellhart v. 

Axford, 485 P.2d 1031, 1034 (Wyo. 1971). Further, a promise that 

is not expressed in the contract, or an unexpressed condition of 

an express promise, can be implied when the conduct of the parties 

reasonably interpreted has expressed the promise. And an unexpressed promise can be put in by construction of law when justice 

demands it under the circumstances that have arisen. HML Corp. v. 

General Foods Corp., 365 F.2d 77, 82 (3d Cir. 1966) (citing 3 A. 

Corbin, Contracts§ 569, at 339-41 (1960)). In a requirements 

contract, a gap may be filled by implication if it is "necessary 

in order that the contract should not be unreasonable or unfair to 

one of the parties" under the circumstances. Id. at 81. 

In reviewing the all-requirements contract in this case, we 

note several aspects of the contract that make it a unique 

requirements contract. First, it is clear from the contract that 

the parties are interrelated. Shoshone is specified throughout 

the contract as a member of Tri-State. This relationship indicates that the all-requirements contract is not a commonplace 

arm's-length requirements deal between private parties. Second, 

it is clear from the all-requirements contract that the REA, which 

is referenced throughout the contract, is materially .connected to 

the contract and the parties' contractual relationship. As an 

-20-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 20 
- example, the contract, including each- supplement. to the contract, 

is not effective or binding on the parties until approved by REA. 

Indeed, a contract among Shoshone, Tri-State, and REA, which 

serves as a supplement to the June 23, 1965, contract, specifies 

that execution of the all-requirements contract is subject to the 

approval of REA under the terms of the loan contracts entered into 

with REA. Also, the all-requirements contract provides that the 

rate schedule and any revision of rates must be approved by REA. 

The all-requirements contract makes clear that the Tri-State 

cooperative system was organized by its members for the purpose of 

furnishing them a long-term source of power. The 1965 contract 

specifies further that Tri-State expected to construct an electric 

generating plant or transmission system, or both, for the purpose 

of supplying electric power and energy to its members. And the 

contract specifies that Tri-State entered into a similar allrequirements contract with each member of Tri-State. This recital 

clearly shows the interrelationship of the Tri-State system and 

its members. 

The contract also connects Shoshone's purchase of its 

system's requirements to Tri-State's indebtedness. For example, 

the 1965 contract specifies that Tri-State can revise the rates 

charged for electric power so that the revenues produced under the 

all-requirements contracts are sufficient to make payments on 

account-of Tri-State's indebtedness. Moreover, in 1958 Shoshone 

agreed to purchase its system's electric power requirements until 

-21-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 21 
1991,. agreeing that the contract, ''.shall . remain in effect until 

midnight of the 31st day of December, 1991." Beginning in 1965 

and in subsequent years, Shoshone agreed to extend the term of the 

all-requirements contract, each extension matching Tri-State's new 

loan repayment period. As noted, the extensions required REA 

approval. 

With the most recent extension in effect, Shoshone agreed to 

purchase the electric power requirements of its system from Tristate until December 31, 2020. We believe that that promise to 

purchase requirements for a definite term, especially in light of 

the extensions and other pertinent provisions in the contract, 

implies that Shoshone will remain in business and maintain 

requirements throughout the term of the contract, as long as there 

are sufficient members in Shoshone's system requiring electric 

power. We also believe that an agreement to remain in business 

and maintain requirements must be implied so that the allrequirements contract can be carried out in the way clearly 

anticipated and not rendered unreasonable to Tri-State and REA. 

To be sure, the all-requirements contract does not specifically state that Shoshone is to remain in business and maintain 

requirements. On the other hand, the contract does not state that 

Shoshone can just eliminate its requirements (even though it has 

members requiring power) and cease business prior to the end of 

the agreed-upon term of the. contract.simply .by.selling its assets 

and member subscriptions to Pacific. Because the contract is not 

-22-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 22 
clear on this point, 10 we· believe it.appropriate to review the 

circumstances surrounding the parties' contractual relationship, 

including the parties' relationship and their conduct in extending 

the term of the contract to match loan pay-off periods, to ascertain what the parties contemplated at the time of contracting. 

Accord Rouse v. Munroe, 658 P.2d 74, 78 (Wyo. 1983); Shepard v. 

Top Hat Land & Cattle Co., 560 P.2d 730, 732 (Wyo. 1977). 

An obligation on the part of the buyer to maintain requirements and remain in business has been implied even in situations 

involving a requirements contract stemming from an arm's-length 

business deal between unrelated, private parties. For example, 

Central States Power & Light Corp. v. United States Zinc Co., 60 

F.2d 832 (10th Cir. 1932), involved a contract requiring a buyer 

to purchase a specified amount of gas each day for a set number of 

years. The contract provided, however, that if the buyer's total 

daily requirements were less than the specified amount, the buyer 

was only required to take and pay for the amount of its requirements. Prior to the end of the contract's term, the buyer discontinued operation of its plant. The buyer claimed that it was 

no longer required to purchase gas from the seller since the buyer 

was only required to purchase the amount of its total requirements 

and its total requirements were zero. According to the court, the 

contract was to be in full force and effect for a definite period; 

10 We do not agree with the district court's legal determination 

that the all-requirements contract unambiguously spells out 

Shoshone's obligations on this point. 

-23-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 23 
and the closing or discontinuance of the buyer's plant did not 

eliminate the buyer's liability under the contract. "The [buyer] 

owning an established business had the implied obligation to continue it in the usual manner, and accept during the time fixed the 

gas required to so conduct it." Id. at 834. The court then 

viewed the circumstances under which the parties entered into the 

contract and determined that the effect of the buyer's contention 

was that "the [seller] was to go to great expense in preparation 

to deliver the gas, but the [buyer] was not obligated to take it 

for any definite time, with the result that, if [buyer] could be 

rid of the obligation at the end of the period of operation, it 

could likewise avoid it in one month or one day." Id. According 

to the court, "[s]urely this would be a most unreasonable interpretation of the contract. And it overlooked the stipulation to 

take the gas for a certain period; also the expression in the contract of 'requirements' instead of desire or will on the part of 

the [buyer]." Id. 

To be sure, the contract in Central States was not a pure 

requirements contract. Even so, the court noted that the buyer 

"was not bound to take beyond its requirements." Id. We think 

the reasoning in Central States may be applied in the present 

action. 

In Diamond Alkali Co. v. P.C. Tomson & Co., 35 F.2d 117 (3d 

Cir. 1929), the parties entered into a requirements contract 

wherein the buyer agreed to purchase its entire requirements of 

-24-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 24 
soda ash, caustic soda, and bicarbonate of soda, from the seller 

over a certain period of time. Also, the seller agreed to sell to 

the buyer a piece of land on which to erect a new plant. The 

seller further agreed to loan a certain sum of money to the buyer 

as needed for the erection of the new plant, and the buyer agreed 

not to encumber its assets. The buyer agreed not to sell or lease 

the new plant. While the new plant was being built, the buyer 

continued to operate its old plant and purchase its requirements_ 

from the seller. However, prior to moving into the new plant, the 

buyer sold its old plant, went out of business, and refused to 

open or operate the new plant. The issue before the court was 

whether or not the buyer was obligated to continue in business and 

buy its requirements throughout the term of the contract. 

The court noted that there was no express provision in the 

contract requiring the buyer to continue in business and buy its 

requirements throughout the term of the contract. Nevertheless, 

"[t]hat there may be an agreement in which an undertaking not 

express is imputed to a party because of other undertakings, which 

are expressed, is undoubted." Id. at 118. The court reviewed the 

contract and other evidence in the record and determined that the 

parties anticipated, intended, or implied that the contract was to 

continue throughout the definite term. The court stated: "There 

was a period during which it was understood that 'the term of this 

contract' was to run. There is no intimation that 'the term' was 

- to -be other. than the five years mentioned." _.Id. at 119. Likewise, in the present action, there is a definite term under the 

-25-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 25 
eontract during which it. was clearly understood by the parties 

that the contract was to run. 

The court in Diamond Alkali stated further: 

All the negotiations between the parties, the entire 

contract with all its covenants and the entire enterprise of the parties were based upon the proposed "continuance" of the contract for "the term" of five years. 

The fulfillment of their undertakings necessarily 

implied such a continuance. The parties in good faith 

contemplated performance of the covenants requiring the 

[buyer] to purchase all its specified supplies from the 

[seller] for five years and implicit in these negotiations and stipulations was the bona fide operation by 

the [buyer] of its manufacturing plant ••• for that 

period. The [buyer] did not intend to do otherwise 

until an unexpected opportunity to make "an advantageous 

sale" presented itself. 

Id. at 119. As in Diamond Alkali, it is clear from the record 

that the all-requirements contract and the entire enterprise of 

the parties in this case are based on the continuance of the contract throughout the agreed-upon term, especially in light of the 

cooperative nature of the Tri-State system, the role the allrequirements contract plays in the cooperative venture, and the 

participation and interrelationship of the individual cooperatives. Clearly, the fulfillment of Tri-State's and Shoshone's 

undertakings necessarily implies such a continuance~ "Whenever a 

contract cannot be carried out in the way it was obviously 

expected that it would be carried out without one party or the 

other performing some act not expressly promised by him, a promise 

to do that act must be implied." - Id. at 119-20. The record .is 

clear in this case: The parties obviously expected that Shoshone 

would continue purchasing electric power from Tri-State ·throughout 

-26-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 26 
the term of the contract as long as Shoshone had sufficient members requiring electric power. If Shoshone is able to eliminate 

its requirements by simply transferring its member subscriptions 

to Pacific, the contract cannot be carried out in the way it was 

expected. If Shoshone puts itself in a position in which it cannot carry out the all-requirements contract, it breaches the contract. 

Texas Industries, Inc. v. Brown, 218 F.2d 510 (5th Cir. 

1955), involved a requirements contract under which the buyers 

agreed to purchase from the seller all of the lightweight aggregate that the buyers would require for a period of five years. 

Because the seller's production at its plant was already committed 

to other customers, it was necessary for the seller to build a new 

aggregate plant in order to supply the buyers' needs. In determining whether the buyers remained obligated under the contract 

notwithstanding that they leased the plants to a third party, the 

court stated: "In our opinion, neither a sale nor lease of the 

[buyers'] plants, nor an assignment of the contract, by the buyers 

could in law effectuate a release of their obligations under the 

contract without the consent of [the seller]." Id. at 512 (emphasis added). According to the court, the contract showed that the 

requirements of the buyers' plants were the subject matter of the 

parties' contract and within the parties' contemplation: "The 

plants have not been sold; they have not been shut down; they have 

not been dismantled; they have never ceased to operate and_to have 

requirements." Id. Similarly, in the p·resent case, it is quite 

-27-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 27 
clear from the all-requirements contract that the. requirements of 

Shoshone's members were the subject matter of the parties' contract and within the parties' contemplation at the time of contracting. Those members have not ceased to have electric power 

requirements; Shoshone is merely transferring its members' 

requirements to Pacific. 11 

Based on the above analysis, the court in Texas Industries 

held: 12 

In these circumstances, the law ••• imposes an 

implied obligation upon the buyers to keep the plants in 

operation lest, by disposing of them or shutting them 

down, the buyers be permitted to destroy the subject 

matter of the contract, the requirements of the plants, 

in violation of the intention of the parties that sales 

and purchases under it would continue for the full term 

thereof. 

Id. (determination made on appeal from summary judgment). The 

court further held that a business situation can necessarily provide a promise "on the part of the buyer to maintain his business 

or plant as a going concern, and to take its bona fide requirements. 'In other words, this view implies an obligation to carry 

out the contract in the way anticip~ted, and not for purposes of 

speculation to the injury of the other party.'" Id. at 512-13 

(quoting Portland Gas Co. v. Superior Marketing Co., 150 Tex. 533, 

11 Nothing in the record suggests that if Shoshone is not 

permitted to leave the Tri-State system, it could not remain a 

viable distribution cooperative fulfilling its members' needs. 

12 Although the court in Texas Industries looked to Texas law, 

we believe the conclusion and rationale in.that case would be 

followed by the Wyoming courts. 

-28-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 28 
243 $.W.2d 823, 825 (1951)). 13 Like the buyer in Texas Industries, Shoshone cannot be permitted to destroy the subject matter 

of the all-requirements contract--the requirements of its 

members--in violation of the obvious intention of the parties that 

purchases under the contract would continue throughout the full 

term of the contract. 

Although an obligation to remain in business and maintain 

requirements has been implied in certain situations, we are aware 

that typically "the buyer in a requirements contract is required 

merely to exercise good faith in determining his requirements and 

the seller assumes the risk of all good faith variations in the 

buyer's requirements even to the extent of a determination to liquidate or discontinue the business." HML Corp., 365 F.2d at 81. 

This conventional rule, of course, is based on the self-interest 

of the buyer to continue a profitable business and have the largest possible requirements; and the rule is recognized in the routine arm's-length requirements deal inasmuch as the seller can 

13 The court in Texas Industries, 218 F.2d at 513, briefly 

discusses three cases in support of its position: Wells v. 

Alexandre, 130 N.Y. 642, 29 N.E. 142 (1891), Great Lakes & St. 

Lawrence Transportation Co. v. Scranton Coal Co., 239 F. 603 (7th 

Cir. 1917), and Kamm v. Pritchard, 296 F. 871 (5th Cir. 1924). We 

are told that in Wells the court held that the buyer's sale of 

steamers after making a contract to purchase coal for one year did 

not relieve the buyer from the obligation to take coal that the 

ordinary and accustomed use of the steamers required. In Great 

Lakes the court held that a contract carried with it an implied 

obligation on the part of the buyer to continue its·business 

during the term of the contract and run its boats in a reasonable 

manner. And in Kamm the court held that although a contract to 

.sell the. defendants'- .,output of lumber .contained no covenant by the 

defendants-hot to sell their entire lumber operation, the contract 

was nevertheless enforceable by the plaintiff. 

-29-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 29 
.adjust the price in proportion to the risk he carries that the 

buyer will have no requirements. 14 

The all-requirements contract in this case, however, is not a 

routine arm's-length requirements contract between unrelated, private for-profit parties. Shoshone's participation in the Tristate cooperative system and its interrelationship with Tri-State 

and the other members of the Tri-State system make the partiesi 

contractual relationship a unique one. The all-requirements 

contracts which form the Tri-State system are not simple requirements contracts but rather interdependent, joint and mutual contracts with a common purpose of securing the REA loans and thereby 

effectuating the REA policy to provide the economic means for supplying electricity to rural areas. The case law dealing with the 

run-of-the-mill requirements contracts between private parties is 

not dispositive. Indeed, as we have mentioned earlier, "this case 

arises in an unusual context with no close parallel in the extant 

cases." Shoshone I, 805 F.2d at 359. 

Because of the.unique circumstances in this case, the allrequirements contract must be viewed in conjunction with the 

entire cooperative system and REA program, including Shoshone's 

14 In this case the very purpose behind forming the cooperative 

Tri-State system to provide electric power to rural users at a 

r~asonable cost is obviously undercut if Tri-State raises the 

rates charged to its members simply to take into account the possibility that the members will sell out and have no requirements. · ::Also,. the rationale stated undercuts the cooperative, nonprofit 

nature of the whole Tri-State system. 

-30-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 30 
participation in and.relationship to Tri-State, the interdependency of the members in the Tri-State system, the purpose behind 

the REA program and its connection to the all-requirements contract, Shoshone's realization of benefits at the Tri-State level 

as a member of an REA-financed cooperative system, the purpose for 

which Tri-State obtained the REA loans, the reasons for entering 

into the all-requirements contract, the connection between the 

contract and Tri~state's indebtedness, the role the all-requirements contract plays in the cooperative system, and the obvious 

need for an intact system and a continued revenue stream. 

Based on our review of the contract and the circumstances 

surrounding the parties' contractual relationship, we are convinced that Tri-State and Shoshone contemplated at the time of 

contracting and when entering into the cooperative venture that 

Shoshone would remain in business and continue purchasing the 

requirements of its members from Tri-State throughout the agreedupon term of the contract. We are further convinced that each 

time Shoshone agreed to extend the contract, the parties presupposed that Shoshone would provide a revenue stream corresponding to Tri-State's repayment of its debt obligations--obligations 

clearly incurred on behalf of Shoshone and the other cooperative 

members of Tri-State. 15 Only through these expectations and the 

15 We do not decide how the contract governs the rights and 

liabilities of the parties in a situation where a cooperative 

member becomes financially unable to continue to service its 

customers •. The record is clear that Shoshone is not in such· a 

position·. 

-31-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 31 
fulfillment of. the parties' respective obligations could the 

cooperative system work. Indeed, the assurance of a long-term 

source of power and a long-term revenue stream is the very essence 

of the all-requirements contract and the Tri-State system; and the 

cooperative nature of the Tri-State system is dependent on the 

continuance of each member's contract. The contracts also allow 

the entire system to be viewed as a whole, combining the members' 

financial strength and increasing their ability to obtain funds, 

through Tri-State, to build facilities and obtain power in an 

attempt to meet the members' actual and projected power needs. 

Shoshone and its members have been able to take advantage of the 

combined strength of individual cooperatives and the electric 

power transmitted by Tri-State to the Shoshone service area as a 

direct result of the federal monies obtained at the Tri-State 

level. In effect, Tri-State and the federal government through 

the REA program have made it possible for Shoshone to provide 

electric power to its members. Selling out prior to the end of 

the contract would constitute an abuse of the federal program. 16 

If Pacific is allowed to purchase Shoshone's member subscriptions, 

Shoshone is not sharing the burden that has come with the benefits 

16 Cf. Upper Missouri G & T Electric Cooperative, Inc. v. McCone 

Electric Co-op, Inc., 160 Mont. 498, 503 P.2d 1001, 1004 (1972) 

(quoting Upp~r Missouri G & T Electric Cooperative, Inc. v. McCone 

Electric Co-Op, Inc., 157 Mont. 239, 484 P.2d 741, 747 (1971)) 

("Ten years after the [wholesale power] contract, initiated and 

inspired, we are told, by defendant [McCone], defendant [McCone] 

now wants a better deal elsewhere. It is as simple as that."). 

-32-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 32 
it has received under the· REA program; and Pacific would be purchasing assets supported by federal dollars and a ready-made market created by a federal program, without having to assume corresponding obligations. "The sale converts taxpayer bounty to the 

private profit of Pacific." Id. 

We hold, therefore, that Shoshone has an implied obligation 

to remain in business and not to eliminate it~ requirements, as 

long as there are members in the Shoshone system requiring electric power. In other words, the fulfillment of Shoshone's contractual undertakings necessarily implies the continuance of 

Shoshone's system. Otherwise, the contract could not be carried 

out in the way anticipated and would be rendered unreasonable to 

Tri-State and the REA. Consequently, Shoshone breaches the allrequirements contract as a matter of law when it attempts to eliminate its requirements by selling its member subscriptions to 

Pacific and ceasing business. The district court erred in determining that there was no such obligation. 

Although the all-requirements contract in this case is not a 

commonplace requirements contract between private parties, we do 

agree that an unavoidable reduction or elimination of Shoshone's 

requirements would not be a breach of Shoshone's obligation to 

remain in business and maintain requirements. As an example of an 

unavoidable circumstance, the record indicates that cogeneration 

(where the- customer generates-its own electricity and does not 

need to buy from the neighborhood utility) could result in the 

-33-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 33 
drastic loss of-members and even the.cessation of Shoshone's 

system. Also, because a majority of Shoshone's customers are 

industrial load customers, the shutting in of oil wells could 

reduce or even eliminate Shoshone's requirements. And a force 

majeure (uncontrollable force) may result in the elimination of 

requirements and cessation of Shoshone's business. 17 If any of 

these events causes Shoshone to cease existence or eliminate its 

requirements, that may be a good faith elimination and thus not a 

breach of Shoshone's contract. However, as a matter of law, we 

are convinced that when there are sufficient members in Shoshone's 

system requiring electric power, a sale of Shoshone's assets or 

member subscriptions to Pacific cannot qualify as a good faith 

reduction or elimination of requirements. 

There is no question that at the time of the purported sale 

there were sufficient members in Shoshone's system requiring 

electric power. Those members have never ceased to have requirements.· Indeed, a sale of Shoshone's assets does not reduce or 

eliminate Shoshone's requirements for power except in the most 

technical sense. Only the source of the power changes. Under 

these circumstances, Shoshone cannot escape its contractual obligations simply by taking its members' requirements out of the 

17 We note that the General Power Contract Provisions, which 

have been incorporated into the all-requirements contract, 

expressly state that Shoshone is not in default under the allrequirements contract if Shoshone is prevented from fulfilling its 

obligations under the contract by reason of uncontrollable forces, 

i.e., causes beyond Shoshone's control, which by due diligence and 

foresight Shoshone could not reasonably have been expected to 

avoid. 

-34-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 34 
Tri-State system and transferring them to Pacific •. Cf. Western 

Oil & Fuel Co. v. Kemp, 245 F.2d 633, 638 (8th Cir. 1957) (buyer 

did ·not cease to do business in good faith inasmuch as 

requirements never ceased except in the most technical sense). 

Inasmuch as we have determined as a matter of law that the 

sale of Shoshone's assets to Pacific under the circumstances of 

this case is a breach of Shoshone's implied obligation to remain 

in business and maintain requirements, a new trial on liability on 

this issue is unnecessary. Having made this determination, we 

turn to the adequacy of Tri-State's and REA's legal remedy to 

determine whether or not the district court abused its discretion 

in denying permanent injunctive relief. 

B. Adequacy of Legal Remedy 

We have reviewed the record and believe that monetary damages 

could likely compensate Tri-State for the injury it would sustain 

as a result of a breach of Shoshone's contractual obligation. If 

Tri-State is awarded in damages the present value of what it would 

have realized over the life of Shoshone's all-requirements contract, Tri-State is presumably made whole under the contract. 18 

18 Of course, the loss of a member such as Shoshone would result 

in a loss of an all-requirements contract that could have been 

extended and thus looked to as additional security if Tri-State 

needed to obtain additional loans to maintain and operate its 

system. However, there is no assurance that Shoshone would have 

agreed to further extend the term of the contract to match 

additional loan repayment periods. 

If Tr i:.;;.-state is awarded monetary damages for Shoshone's 

breach, we also do not think that Tri-State's financial position 

or strength will be adversely affected to the point of terming 

-35-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 35 
Other members of the Tri-State system would not be adversely 

affected by Shoshone's ·leaving the system because the damages 

awarded could cover the revenue stream that would have come in 

under the Shoshone contract. Also, an award of damages reduces 

the possibility of a 1tdomino effect" (i.e., the likelihood that 

once Shoshone leaves the Tri-State system, other members will follow suit, resulting in a possible collapse of the entire system). 

Because Shoshone would be required to pay damages, other Tri-State 

members no doubt would be discouraged from leaving the system 

under circumstances similar to the present case because they also 

would be required to pay for their wrongful elimination of 

requirements. In other words, we are not evaluating the possible 

domino effect if Shoshone is freely permitted to sell its assets 

and leave the system. A permanent injunction cannot be granted 

simply because Shoshone's leaving the system may result in others 

leaving. An injunction is appropriate only if Shoshone commits a 

legal wrong by leaving the system--e.g., a breach of contract--and 

if the injury sustained from that wrong cannot be adequately compensated. Thus, we are evaluating the possible domino effect if 

Shoshone breaches its all-requirements contract, pays damages as a 

result of the breach, and leaves the system. In that instance, we 

are not persuaded from the record before us that Shoshone's wrongful departure from the system would prompt an exodus of members 

resulting in the collapse of Tri-State or the irreparability of 

Tri-State's injury. 

Tri-State's legal remedy "inadequate." 

-36-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 36 
Withregard to.REA, we cannot say that REA's security or loan 

position will be irreparably impaired or that the viability of the 

whole REA system and the policies implemented through it would be 

threatened by the sale of Shoshone's assets, if Shoshone is 

required to pay monetary damages for the wrongful elimination of 

its requirements. An award of damages to Tri-State would cover 

the loss of Shoshone's revenue stream which REA looks to as security for the Tri-State loans. Additionally, we cannot say that 

the district court was clearly erroneous in finding that REA would 

not be irreparably harmed. 

Tri-State claims that its legal remedy is inadequate because 

damages are not calculable or measurable at this time with any 

reasonable degree of accuracy or certainty. This is the most persuasive of Tri-State's contentions. Cf. Molex, Inc. v. Nolen, 759 

F.2d 474, 477 (5th Cir. 1985) (irreparable harm includes injuries 

"for which compensation cannot be measured by any certain pecuniary standard"); Roland Machinery Co. v. Dresser Industries, Inc., 

749 F.2d 380, 386 (7th Cir. 1984) (difficult to project loss into 

distant future; incalculability of damages renders legal remedy 

inadequate); Central Illinois Public Service Co. v. Consolidated 

Coal Co., 527 F. Supp. 58, 67 (C.D. Ill.) (no adequate remedy at 

law because damages under long-term requirements contract "will be 

very difficult of ascertainment"), aff'd, 673 F.2d 1333 (7th Cir. 

1981); U-Haul International, Inc. v. Jartran, Inc., 522 F. Supp • 

.. 1238, 1255 ( D. Ariz •. 1981) ( "The difficulty of measuring actual 

injury to a party is justification itself for granting injunctive 

-37-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 37 
reliefr since any.remedy.at law would be inadequate."), aff'd, 681 

F.2d 1159 (9th Cir. 1982). However, we do not believe that the 

district court abused its discretion as a matter of law in denying 

injunctive relief after determining that Tri-State's damages are 

reasonably calculable based on the evidence presented at trial. 

In this respect, although damages for breach of a long-term 

requirements contract may appear to be difficult to ascertain, 

especially when requirements can vary considerably over a lengthy 

period of time, we cannot say at this time that the damages in 

this case cannot be calculated with a reasonable degree of accuracy or that the estimation of damages is so speculative that any 

award would be inadequate. Cf. U-Haul International, 522 F. Supp. 

at 1255-56 (measure of injury defies calculation and can be measured only by speculation and conjecture). We reach this conclusion on the record presently before us. Tri-State's own expert 

witness, Dr. George F. Rhodes, testified that a reasonable estimate could be made, even though it would be difficult to determine 

Tri-State's exact loss over the term of Shoshone's allrequirements contract. Dr. Rhodes thoroughly explained his method 

of calculating Tri-State's future "lost profits." He apparently 

relied on pertinent historical data and the 1986 power requirements study on future load growth and related forecasts, and 

exhibited no difficulty in making a reasonably accurate calculation of Tri-State's losses. The assumptions and projections based 

on these data appear to present a plausible basis for calculating 

the. dam_ages Tri-State would suffer. Dr. Rhodes gave a firm 

opinion that Tri-State's damages would fall within a relatively 

-38-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 38 
narrow range and that his· calculations were a "reasonable esti-

.rnate" to a "reasonable degree of economic certainty." Record, 

vol. 10 (Transcript of Trial Proceedings), at 1667-68. Most 

importantly, we find nothing in the record to indicate that the 

calculations made by Dr. Rhodes were not reasonably accurate or 

that the extent of Tri-State's loss was impossible to ascertain 

with a reasonable degree of certainty. Dr. Rhodes' expert testimony was uncontradicted. 19 Although the jury did not award the 

full amount of damages calculated by Dr. Rhodes, this does not 

necessarily mean, without additional indications of the jury's 

difficulty in assessing damages, that Tri-State's future damages 

as a result of Shoshone's leaving the system cannot be reliably 

measured. 

As mentioned, the district court relied on the evidence presented at trial in determining that the damages in this case are 

reasonably calculable. However, since there will be a new trial 

19 As mentioned, Dr. Rhodes relied on several assumptions and 

forecasts in arriving at his conclusions. The past has shown, 

however, that the electric power market is volatile and somewhat 

unpredictable. In fact, this very lawsuit sterns from problems 

with the accuracy of certain power forecasts. Also, although Tristate is presently in a surplus situation, that could change at 

any time. And Shoshone's power requirements and even the rates 

charged under the contract could vary considerably over the 

remaining term of the contract. The unpredictability of the electric power market and the variability of Shoshone's requirements 

over the next 32 years could create a real problem in determining 

damages with any reasonable degree of accuracy. However, we do 

not find anything in the record establishing the uncertainty of 

calculation. We have only Dr. Rhodes' expert testimony, which 

appears to be sound in light of the fact that there is no contradictory evidence. 

-39-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 39 
- -0n the issue of.,damages, 20 and evidence will necessarily be presented on Tri-State's future damages, the district court may 

determine after the new trial and upon further consideration of 

all evidence presented that future damages resulting from a breach 

of Shoshone's long-term all-requirements contract are too difficult to measure with any reasonable degree of certainty, notwithstanding Dr. Rhodes' testimony. In this respect, evidence concerning Tri-State's future damages is obviously intertwined with 

and directly affects the determination of whether injunctive 

relief should be granted because future damages are incalculable. 

Indeed, the evidence at the new trial may shape up differently and 

bear out that damages are incalculable. The jury may indicate 

that it cannot calculate Tri-State's future damages with any reasonable degree of accuracy or that it is having substantial difficulty measuring damages. Such an indication will certainly affect 

our review on a subsequent appeal if the district court again 

determines that damages are calculable and consequently denies 

injunctive relief. We therefore determine it necessary to vacate 

the district court's order denying the permanent injunction, pending a final determination after the new trial as to whether or not 

adequate damages are actually calculable in this case. If future 

damages are not capable of reliable calculation, injunctive relief 

20 We noted earlier that the district court granted a new trial 

on all issues. Because the determinations on this appeal have 

rendered unnecessary a new trial on the issue of liability, it 

appears that. the~~ew trial will be limited to the issue of 

damages. 

-40-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 40 
would ..be appropriate. 

Tri-State next contends that effective legal relief cannot be 

obtained without multiple suits. However, if Shoshone breaches 

its contractual obligations by leaving the system and is required 

to pay damages to Tri-State as a result of that breach, we do not 

see that this would result in numerous suits needing to be instituted to compensate Tri-State for injury sustained as a result of 

Shoshone's breach. In other words, we do not believe that effective relief for Shoshone's breach can be secured only through the 

prosecution of multiple lawsuits. Unlike Taylor Ditch Co. v. 

Carey, 520 P.2d 218 (Wyo. 1974), this is not a case where the 

injury sustained by the same wrong is of a continuing nature. Any 

future litigation involving the elimination of requirements of 

other members of the Tri-State system would require a separate 

evaluation of how and under what circumstances the requirements 

were eliminated. Also, the extent of Tri-State's or REA's injury 

will depend on the resulting effect of and the circumstances surrounding the breach. 

Tri-State also contends that its remedy at law is inadequate 

because an award of damages is uncollectible inasmuch as Shoshone 

would cease existence upon selling its assets. However, Pacific 

has agreed to indemnify Shoshone and hold it harmless with respect 

to claims, actions, proceedings, or demands which are associated 

with the sale of Shoshone's assets. As a result of this indemnification agreement, we cannot say, based on the record now before 

-41-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 41 
us, that Tri-State will have such difficulty in collecting a damages award against Shoshone so as to render the legal remedy 

inadequate. 

Also, we agree with the district court that Pacific is judicially estopped from denying its obligation to pay any judgment 

rendered against Shoshone. Inasmuch as the application of judicial estoppel in this diversity action goes to the adequacy of 

Tri-State's legal remedy, we look to the appropriate state law to 

determine whether judicial estoppel is recognized. See, ~.9 ... =..1 

Ellis v. Arkansas Louisiana Gas Co., 609 F.2d 436, 440-41 (10th 

Cir. 1979), cert. denied, 445 U.S. 964 (1980); Reno v. Beckett, 

555 F.2d 757, 770 (10th Cir. 1977). The parties do not dispute 

that Wyoming law is the applicable state law in this case. Under 

Wyoming law, Pacific is judicially estopped from subsequently taking a position inconsistent with its representations in this 

action to the effect that it will indemnify Shoshone for any damages rendered against Shoshone in this action. See Amfac 

Mechanical Supply Co. v. Federer, 645 P.2d 73, 79 (Wyo. 1982); 

Gray v. Fitzhugh, 576 P.2d 88, 91 (Wyo. 1978). The perceived 

rejection of judicial estoppel in United States v. 49.01 Acres of 

Land, 802 F.2d 387, 390 (10th Cir. 1986), which is not a diversity 

case, is inapposite to the present action. 

-42-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 42 
IV. Conclusion 

We conclude that the district court erred in determining that 

Shoshone does not have an implied obligation to maintain requirements and remain in business throughout the term of the allrequirements contract, and in referring to or relying on that 

determination in concluding that the injunctive relief sought by 

Tri-State and REA was overly broad and thus improper. We further 

conclude that Shoshone breached its implied obligation as a matter 

of law when it eliminated its requirements by selling its assets, 

including the member subscriptions, to Pacific. Because we so 

hold, a new trial on the issue of liability is unnecessary. 

Additionally, we conclude at this time that the district 

court did not abuse its discretion in denying the permanent 

injunction based on the evidence before the court. However, 

because a new trial on damages must still be undertaken, we vacate 

the district court's order denying the permanent injunction so 

that the district court can make a final determination after the 

new trial as to whether or not future damages are actually measurable in this case. If the evidence presented indicates to the 

court that future damages are not reasonably calculable, permanent 

injunctive relief would be appropriate. 

The district court's order denying Tri-State's and REA's 

request for a permanent injunction is SET ASIDE and VACATED in 

accordance with this opinion. 

-43-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 43 
No. 87-2288, Tri-State Generation and Transmission Assn. and 

United States v. Shoshone River Power, Inc., et al. 

BALDOCK, Circuit Judge, dissenting. 

The court has determined that the district court's order 

denying the permanent injunction sought by Tri-State and the REA 

should not be reversed, but merely vacated and set aside. This is 

in the event that the facts later justify entry of permanent 

injunctive relief. This accomplishes little, other than 

suggesting a result to the district court. Because the record 

supports the trial court's decision not to grant permanent 

injunctive relief, I would not disturb the district court's order. 

Tri-State and the REA may ask for reconsideration of the order 

denying permanent injunctive relief without our help. 

In addition, the court has reviewed an issue (the contract 

issue) on which the district court granted partial summary 

judgment. The court decides that the all-requirements wholesale 

power contract contains an implied obligation for Shoshone to 

maintain requirements and stay in business over the life of the 

contract. In reviewing the denial of a permanent injunction, we 

may have jurisdiction to decide other nonappealable issues; 

however, such jurisdiction ought to be exercised only when the 

nonappealable issues are inextricably intertwined with reviewing 

the propriety of injunctive relief. The contract issue in this 

case plainly does not meet that test. 

The purported jurisdictional base for the court's decision on 

the contract issue is pendent appellate jurisdiction. Even the 

prevailing view seems to be that this doctrine s""hould be used 

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 44 
... sparingly and only for the most compelling reasons. See 16 

c. Wright, A. Miller, E. Cooper & E. Gressman, Federal Practice 

and Procedure§ 3937 at 269-71 (1977). I would not apply the 

doctrine here because the exercise of such jurisdiction is 

directly contrary to the district court's decision concerning 

interlocutory review pursuant to 28 u.s.c. § 1292(b). Though 

requested to do so, the district court declined to certify the 

partial summary judgment order containing the contract issue. But 

the court ignores the district court's decision on this point, and 

effectively reverses it. Because we have no jurisdiction to 

review, let alone reverse, the district court's refusal to 

certify, I would not decide the contract question. 

Even assuming arguendo that the contract question is properly 

before us, it should be decided differently because it is doubtful 

that the Wyoming courts would follow the minority view adopted by 

this court. The weight of mopern authority supports the district 

court's construction of the contract under Wyoming law and 

precludes holding Shoshone and Pacific liable as a matter of law 

based on an implied obligation to stay in business. 

Even if this court's interpretation of the co~tract was 

correct, though, it does not obviate the need for a new trial on 

some liability issues. For example, the tort claim for 

interference with contractual relations remains pending and is 

subject to the district court's new trial order. Yet, the court 

has restricted the scope of the new trial only to damages. For 

-2-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 45 
_ these many reasons, I respectfully dissent. 

I. 

Adequate evidence in the record exists to support the trial 

court's conclusion that a permanent injunction should not issue 

because Tri-State has not demonstrated irreparable injury. 

Tri-State's expert quantified damages and the trial court, in 

ordering remittitur, explained that $16 million of the $22 million 

in compensatory damages awarded by the jury represented a multiple 

recovery, 1 clearly supporting the idea that damages can be 

calculated with reasonable certainty. The trial court also found 

that the loss of Shoshone from the Tri-State system will not 

jeopardize the security of Tri-State or the REA. Shoshone 

contributes only three percent of Tri-State's total revenue from 

electric power sales. And despite the loss of revenues from 

Shoshone for nearly a year, Tri-State was able to keep its loans 

current and implement a 6.5% rate decrease! The trial court 

discounted the "domino theory" repeatedly advanced by Tri-State 

and the REA. Essentially, Tri-State has taken steps to bind other 

cooperatives, and the evidence that other cooperative members will 

follow Shoshone's lead, given the litigation risk and other 

factors, is doubtful according to the trial court. 

Although the evidence is controverted on these points, as an 

appellate court, we are bound by the factual findings below if 

they are not clearly erroneous. A finding cannot be clearly 

1 The district court a·lso determined that the $15 million 

_punitive damage award. "was .. improper, as well as. shocking to the 

consc1ence of the Court." Rec. vol. III, doc. 288 at 5. 

-3-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 46 
-erroneous if .. there is evidence which.would support either side. 

Anderson v. City of Bessemer City, 470 U.S. 564, 574 (19.8.5). That· 

is the case here. I would affirm the district court's denial of 

the permanent injunction due to a lack of irreparable injury. 

This court's rationale for vacating the denial of the permanent 

injunction--that evidence of future damages on retrial may prove 

them incalculable--is wholly advisory and unconvincing. The 

appellants certainly would seek reconsideration of the trial 

court's decision on this point after retrial if such were the 

case. We need not school the trial court or the parties on what I 

suspect is a self-fulfilling appellate prophecy. 

II. 

The court also decides the contract issue in this case: 

whether Shoshone has an implied obligation to remain in business 

or merely an implied duty of good faith and fair dealing which 

would extend ~o any decision to discontinue operations and 

eliminate requirements. Relying on the great weight of authority, 

the district court opted for the latter interpretation under 

Wyoming law in granting partial summary judgment on this issue in 

favor of appellees Pacific and Sho~hone. Rec. vol. II, doc. 210 

at 4-12. This court opts for the former interpretation. 

Our jurisdiction to consider this appeal from a denial of 

permanent injunctive relief arises under 28 u.s.c. § 1292(a)(l) 

which provides in pertinent part that the court of appeals has 

jurisdiction of appeals from interlocutory orders of the district 

. courts ..!'granting., continuing, .. modifying, refusing. or disso],ving 

-4-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 47 
injunctions, or refusing to dissolve or modify injunctions." 

Consistent with the federal policy against piecemeal appeals, we 

have jurisdiction to consider those issues raised by the grant, 

denial or modification of an injunction. When courts have decided 

issues resolved by other nonappealable orders, it generally has 

been because those issues are "inextricably bound up with the 

injunction.'' Marathon Oil Co. v. United States, 807 F.2d 759, 765 

(9th Cir. 1986), cert denied, 480 u.a. 940 (1987). The cases 

cited by the court are not to the contrary. Court's Opinion at 

11-12. 

In Takeda v. Northwestern Nat'l Life Ins. Co., 765 F.2d 815 

(9th Cir. 1985), the district court enjoined the plaintiffs from 

filing another state court action after the original action was 

removed to federal court and a motion to remand was denied. Id. 

at 817. In reviewing the propriety of the injunction pursuant to 

§ 1292(a)(l), the court of appeals also resolved the removal 

questions because "the propriety of the underlying removal is 

intertwined with the propriety of granting the injunction." 765 

F.2d at 818. In the case before us, the court admits that the 

contract issue simply is not intertwined with the resolution of 

the injunction question: "This merits determination need not be 

decided as part of our consideration of the permanent injunction 

issue because of our determination below that the record presently 

before us does not support a finding of irreparable harm.'' 

Court's Opinion at 13. 

-5-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 48 
In Cable Holdings of· Battlefield, Inc. v. Cooke, 764 F.2d 

1466 (11th Cir. 1985), the court of appeals reviewed a grant of 

partial summary judgment under§ 1292(a)(l) because it "was the 

basis for both the dissolution of the preliminary restraint and 

the denial of the preliminary injunction." 764 F.2d at· 1472. The 

court concluded that it "could not properly exercise [its] 

jurisdiction under§ 1292(a)(l) without also reviewing the grant 

of partial summary judgment." Id. That certainly does not 

describe the situation here. The district court's order denying 

permanent injunctive relief is firmly grounded on a lack of 

irreparable injury, rather than its resolution of the contract 

issue on partial summary judgment. 

In Sierra On-Line v. Phoenix Software, Inc., 739 F.2d 1415 

(9th Cir. 1984), the court of appeals declined to review an order 

denying summary judgment, while noting that under§ 1292(a)(l) it 

had the "power ... to review all issues underlying an 

injunction." 739 F.2d at 1421. The court determined, however, 

that the summary judgment denial did not involve the same issues 

as the injunction. Id. Stated another way, the substance of the 

summary judgment m9tion was not one of the "salient issues on 

review of this injunction." Id. Likewise, the partial summary 

judgment order on the contract issue in this case is not one of 

the salient issues for our review. 

In Gould v. Control Laser Corp., 650 F.2d 617 (5th Cir. 

1981), the court recognized that it could look at otherwise 

nonappealable aspects of an order concerning injunctive relief, 

-6-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 49 
but declined to_review the merits of a.summary judgment order. "A 

litigant's right to appeal interlocutory injunctions goes only to 

the injunction itself, and he cannot force consideration of the 

merits of the underlying case except as necessary to review the 

injunction." 650 F.2d at 621 n.7. 

Perhaps the broadest statement of jurisdiction cited by this 

court may be found in Energy Action Educ. Fauna·. v. Andrus, 654 

F.2d 735, 745-46 n.~4 (D.C. Cir. 1980), rev'd on other grounds, 

454 u~s. 151 (1981). According to Energy Action, review of a 

nonappealable order is appropriate when (1) further factual 

development is unnecessary, (2) no purpose would be served by 

delay, (3) judicial economy would be served by deciding the issue, 

and (4) essential guidance would be furnished on remand. 654 F.2d 

at 745. The court of appeals concluded its exposition by saying 

that: "The court, however, must restrict its merits decisions to 

issues that are closely related to the interlocutory order on 

appeal." Id. at 745-46 n.54. The court thus resolved the legal 

issue that dominated the litigation and was then able to pass on 

the denial of injunctive relief. Id. at 745. 

The court also relies upon a discussion of the scope of 

appellate review of interlocutory orders contained in 16 

C. Wright, A. Miller, E. Cooper & E. Gressman, Federal Practice 

and Procedure§ 3921 at 16-17 (1977): 

Ordinarily, the scope of appellate review under 

§ 1292(a)(l) is confined to the issues necessary to 

determine the propriety of the interlocutory order 

itself •..• Review quite properly extends to all 

matter.s. inextricably bound up with the remedial 

decision. In addition, the scop~ of review may extend 

-7-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 50 
-further to allow-disposition of all matters 

appropriately raised by the record, including entry of 

final judgment. Jurisdiction·of the interlocutory 

appeal is in large measure jurisdiction to deal with all 

aspects of the case that have been sufficiently 

illuminated to enable decision by the court of appeals 

without further trial court development. 

While our jurisdiction should be exercised to resolve those 

questions ''inextricably bound up" with the merits of ah 

injunction, I am not so sure that it should extend to all matters 

which we happen to think are appropriately raised by the record. 

While it may be more efficient to decide both appealable and 

nonappealable issues at once, we must be conscious of the statute 

which grants us jurisdiction and careful not to displace the 

decisions of the parties and district court concerning 

interlocutory review. Specifically, a district court may now 

direct entry of final judgment as to less than all claims or 

parties, Fed. R. Civ. P. 54(b), or certify a controlling question 

of law pursuant to 28 u.s.c. § 1292(b). For this court to decide 

on an ad hoc basis which nonappealable orders will be reviewed 

multiplies the opportunity for inconsistent application of our 

jurisdiction and undermines a sense of certainty so important in 

th~ evenhanded administration of justice. 

As I understand the court's opinion, the basis for reviewing 

the nonappealable partial summary judgment order is that of 

pendent appellate jurisdiction. According to this concept, a 

court "may occasionally decide questions going beyond the obvious 

limits authorized by the appeal or the petition before it." 16 

c •. Wright,-A. Miller, .E •. Cooper-& E •. Gressman, Federal Practice 

-8-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 51 
and Procedure-§ 3937 at 269 (1977). _ Thus, the.contract.question 

is reviewed, not because it is closely related to the injunction 

issue, but because of concerns of judicial economy. 2 The main 

feature of the injunction appeal is whether damages are 

incalculable, not whether the contract imposes liability as a 

matter of law on Shoshone and Pacific. In the context of this 

appeal, the two issues are not even closely related • 

. Nor is it clear that judicial economy is be~ter served by 

deciding the contract issue. The court's decision does not 

resolve Tri-State's damages claim against Shoshone or Tri-State's 

damages claim that Pacific tortiously interfered with the 

contract. A new trial will be required on these issues, and a 

final decision on the injunction with respect to irreparable harm 

cannot be made until Tri-State's claims for damages are resolved. 

In deciding the contract issue at this point, the court has 

expended far more time than merely deciding the propriety of the 

district court's denial of the permanent injunction. Had the 

injunction issue been decided, the case remanded for retrial and 

2 The court's opinion is confusing on this point. After saying 

that the district court discussed the contract question in its 

order denying permanent injunctive relief, the court then says 

that the contract question does not need to be decided, insofar as 

permanent injunctive relief is concerned, _because there is no 

irreparable injury to warrant such relief. Court's Opinion at 13. 

The court next says, however, that it is deciding the contract 

question because the district court mentioned it in denying 

permanent injunctive relief and the district court heard evidence 

at trial in accordance with its view of the contract. Id. at 13 

n.7. Either the court is deciding the contract question in 

connection with our review of the denial of permanent injunctive 

relief or it is deciding the contract question for some other 

reason, presumably judicial.~conomy, under principles of pendent 

appellate jurisdiction. 

-9-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 52 
-then appealed after entry .of final~~udgment, -a single appeal 

containing all of ~he issues would have followed. To be sure, the 

court has saved some work for the district court with its 

resolution of the contract issue, but how much is speculative 

until we see the appeal that will inevitably follow. Different 

evidence on retrial likely will prompt Shoshone and Pacific to 

urge reconsideration of the contract issue, forcing the next panel 

to revisit the issue. 

The exercise of pendent appellate jurisdiction involves 

concerns of limited judicial power, and consistent and principled 

application of our appellate jurisdiction. See Garner v. 

Wolfinbarger, 433 F.2d 117, 120 (5th Cir. 1970). An ad hoc 

approach to our jurisdiction is inconsistent with our limited 

jurisdiction. If permissible at all, pendent jurisdiction is most 

justified when the appealable and nonappealable issues overlap. 

General Motors Corp. v. City of New York, 501 F.2d 639, 648 (2d 

Cir. 1974) ("The guiding principle to inform the discretionary 

application of pendent appellate jurisdiction is whether review of 

the appealable order will involve consideration of factors 

relevant to the otherwise nonappealable order."). Ironically, the 

court's grounds for invoking pendent appellate jurisdiction 

provide the very rationale that counsels against it. While the 

exercise of pendent appellate jurisdiction arguably may have 

efficiency to recommend it, in this case it not only undercuts the 

district court's discretion to deny certification of an 

... inter.locutory .appeal under 28- U.S.-C. § 1292(b) , __ but also undercuts 

-10-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 53 
. __ the district court's efforts -to .. manage ... the case .. and bring it to 

final judgment. 

we·must consider the appealability of the contract issue with 

respect to the certification process envisioned by 28 u.s.c. 

§ 1292(b), because the district court was requested to certify the 

partial summary judgment order containing the contract question on 

that basis. In the alternative, the district court was requested 

to certify pursuant to Fed. R. Civ. P. 54(b). The district court 

declined to certify on either ground. This court has no power to 

overturn a proper exercise of discretion declining to certify the 

contract question pursuant to§ 1292(b) or Rule 54(b). Yet the 

court has ignored the district court's discretion and completely 

substituted its own in the guise of pendent appellate 

jurisdiction. 

It is very nearly impossible for us to obtain jurisdiction 

from a denial of certification. The denial of a Rule 54(b) motion 

is not appealable. McCall v. Deeds, 849 F.2d 1259 (9th Cir. 

1988); Makuc v. American Honda Motor Co., 692 F.2d 172, 173 (1st 

Cir. 1982) (because only the granting of a Rule 54(b) motion 

interferes with the policy against piecemeal review, only the 

grant of the motion is reviewable under the abuse of discretion 

standard); Boer v. Borg-Warner Corp., 364 F.2d 907 (3rd Cir. 

1966); Miles v. City of Chandler, 297 F.2d 690, 691 (9th Cir. 

1961); see also Jeanette Sheet Glass Corp. v. United States, 803 

F.2d 1576, 1580-81 (Fed. Cir. 1986) (only mandamus would lie from 

a .refusal- to- certify in .. an exceptional case) •.. And it is equally 

-11-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 54 
doubtful that appellate re~iew may be bad of a district.judge's 

refusal to certify pursuant to 28 u.s.c. S 1292(b). In re Master 

Key Antitrust Litigation, 528 F.2d 5, 8 (2d Cir. 1975) (trial 

judge's refusal to certify issues pursuant to 28 U.S.C. S 1292(b) 

is not appealable); Pfizer, Inc. v. Lord, 522 F.2d 612, 61~ n.4 

(8th Cir. 1975) ("This court is without jurisdiction to review an 

exercise of the district court's discretion in refusing such 

[§ 1292(b)] certification."), cert. denied, 424 U.S. 950 (1976); 

United States v. 687.30 Acres of Land, 451 F.2d 667, 670 (2d Cir. 

1971) ("We have no jurisdiction to review the trial court's denial 

of the§ 1292(b) certificate."), cert. denied, 405 U.S. 1026 

(1972); D'Ippolito v. Cities Serv. Co., 374 F.2d 643, 649 (2d Cir. 

1967) ("[W]e cannot conceive that we would ever mandamus a 

district judge to certify an appeal under 28 u.s.c. § 1292(b) in 

plain violation of the Congressional purpose that such appeals 

should be heard only when both the courts concerned so desire."). 

Appellate review of a§ 1292(b) denial to certify would undercut 

the policy embodied in the statute which requires both the 

district court and the court of appeals to exercise their 

discretion in favor of interlocutory review. Sees. Rep. No. 

2434, 85th Cong., 2d Sess. reprinted in 1958 U.S. Code Cong. & 

Admin. News 5255, 5259 (letter from Judicial Conference of the 

United States); Milbert v. Bison Laboratories, 260 F.2d 431, 433-

35 (3rd Cir. 1958) (discussing legislative history). Consent of 

the trial judge is mandatory. Coopers & Lybrand v. Livesay, 437 

U.S. 463, .. 474 (1977) •. In light of_the trial judge's express 

-12-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 55 
denial of § 1292(b) certification, this court shou:IfL recognize the.-

limitations of its jurisdiction. 

III. 

Turning to the merits of the contract issue, the court holds 

"that Shoshone has an implied obligation to remain in business and 

not to eliminate its requirements, as long as there are members in 

the Shoshone system requiring electric power.'' Court's Opinion at 

33. In the appe~l from the denial of a preliminary injunction in 

this case, we tentatively speculated that a routine bilateral 

requirements contract generally does not imply a good faith 

responsibility to have requirements, absent a take-or-pay 

provision or special circumstances. Tri-State Generation & 

Transmission Ass'n v. Shoshone River Power, Inc., 805 F.2d 351, 

359 (10th Cir. 1986). That speculation was in error because the 

duty of good faith and fair dealing extends to a buyer's decision 

to maintain requirements, even in a routine bilateral requirements 

contract. E. Farnsworth, Contracts§ 7.17 at 526-29 (1982); Wyo. 

Stat. Ann. § 34-21-223 (1977) (U.c.c. provision governing 

requirements contracts). Now, however, the court goes far beyond 

a buyer's implied duty to make requirements decisions in good 

faith. Based on Shoshone's participation in the Tri-State 

cooperative system, and the debt owed by that system to the REA, 

the court concludes that the contract contains an implied covenant 

for Shoshone to stay in business for the duration of the contract, 

so long as its members have a need for power. 

-13-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 56 
Notwiihstanding the REA's status as .a third:party 

beneficiary, construction of the contract between Tri-State and 

Shoshone is governed by state, not federal, law because the 

government is not a party to the contract. See Sam Macri & Sons, 

Inc. v. United States, 313 F.2d 119, 124 n.l (9th Cir. 1963} 

(prime contract with the government is governed by federal law 

while subcontract between private parties is governed by state 

law}. Even if the contract was considered to be governed by 

federal law, traditional contract law principles would apply 

absent contrary legislative direction. Priebe & Sons, Inc. v. 

United States, 332 U.S. 407, 411 (1947}; S.R.A., Inc. v. 

Minnesota, 327 U.S. 558, 564-65 (1946). 

In this case, we are dealing with a simple requirements 

contract. The contract provides in pertinent part: 

6. GENERAL. The Seller shall sell and deliver to 

the Member and the Member shall purchase and receive 

from the Seller all electric power and energy which the 

member shall require for the operation of the Member's 

system to the extent that the Seller shall have such 

power and facilities available; ••.• 

Rec. vol. I, doc. 13 (contract of June 13, 1965). At early common 

law, output and requirements contracts were considered 

unenforceable due to a lack of mutuality of obligation; a seller 

might not have any output to sell, or a buyer might not have any 

requirements to buy. R. Hillman, J. McDonnell & S. Nickles, 

Common Law and Equity under the Uniform Commercial Code, 

fl 3.07[2][b][ii] (1985). By applying a doctrine of good faith to 

such contracts, courts were able to enforce them because the 

quantity term b~came more definite when m~asured against the good 

-14-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 57 
faith commercial conduct ·of. the parties. Id. As- Judge McKay 

noted in Big Horn Coal Co. v. Commonwealth Edison Co~, 852 F.2d 

1259, 1267 n.11 (10th Cir. 1988): 

Obligations arising under output and requirements 

contracts are also routinely subjected to good faith 

limitations because the buyer and seller have "some 

discretion" to determine their requirements and outputs. 

E. Farnsworth, Contracts§ 7.17, at 528 (1982); see 

Kapsas Power & Light Co. v. Burlington Northern if:R. · Co., 740 F.2d 780, 789 (10th Cir. 1984), cert dismissed, 

469 U.S. 1200, 105 s.ct. 1155, 84 L.Ed2d 308 (1985) 

("courts will imply a promise that the buyer's 

requirements be in good faith"); Southwest Natural Gas 

Co. v. Oklahoma Portland Cement Co., 102 F.2d 630, 632-

33 (10th Cir. 1939) ("Requirements contract imposes upon 

the buyer the obligation to act in good faith"); see 

also Lambert Corp. v. Evans, 575 F.2d 132, 137-38 (7th 

Cir. 1978) (provision that buyer agreed to "pay as used" 

for seller's inventory did not require buyer to use all 

inventory, but it did imply an obligation of good faith 

to use inventory amounts dictated by "business judgment" 

and not merely "to avoid contractual obligations"); HML 

Corp. v. General Foods Corp., 365 F.2d 77, 81 (3d Cir. 

1966) ("buyer in a requirements contract is required 

merely to exercise good faith in determining his 

requirements"). 

The panel in Big Horn Coal Co. cited Professor Farnsworth's 

discussion of the rule which states clearly: 

Unless the parties have provided otherwise, the court 

will define the obligation to maintain output or 

requirements in terms of good faith. Any reduction in 

output or requirements, including the extreme case of a 

complete cessation on going out of business, must be in 

good faith. 

E. Farnsworth, Contracts§ 7.17 at 528 (footnotes omitted). 

Big Horn Coal Co. is also notable because the court affirmed an 

instruction which allowed the jury to decide whether the buyer had 

reduced requirements in good faith in accordance with a 

contractual provision so allowing. 852 F.2d at 1271-73. 

-15-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 58 
, .. Whether a court shou·ld go beyond implying a duty of good 

faith and also imply that a buyer will have requirements (stay in 

business) is hardly a question of first impression. After noting 

that a requirements contract does not contain a specific quantity 

term, Professor Corbin explained it as "a promise not to buy such 

goods of a third party and a return promise to sell and deliver 

all such goods as the buyer may order in good faith." 3 

A. Corbin, Corbin on Contracts§ 569 at 338 (1960). He continued: 

However, another question of interpretation is often 

raised: Does the buyer promise "by implication" that he 

will have any needs or requirements, that he will send 

in orders during the whole stated period for the amount 

of goods that he has used in the past or that he can use 

profitably by exercise of ability and diligence, or that 

he will not fail to keep his business running with its 

accustomed needs and requirements? 

Similar questions arise respecting contracts for 

the purchase and sale of the "entire output" of a 

factory or mine •.•• 

In both of these classes of cases the courts have 

generally answered the questions in the negative. They 

leave the gap unfilled; no such promises are implied. 

Id. Recognizing that there may be a gap in the agreement, 

Professor Corbin was certain that it should not be filled in by 

the court, however reasonable that might be, because at formation 

the seller may have been quite willing to trust the buyer without 

further assurance. Id. Moreover, given the nature of the 

cooperative system, whether the REA or Tri-State would have 

insisted on, or Shoshone agreed to, an express provision in the 

contract requiring Shoshone to stay in business for the life of 

this contract is subject to serious doubt. Such a potentially 

oppressive commitment would have scared away all but the most 

-16-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 59 
foolhardy distribution cooperatives. And there.was little reason 

for either Tri-State or the REA to insist on such a provision 

because the implied obligation of good faith was established in 

the law on the dates this contract was formed (1965) and extended. 

Professor Williston recognized "the importance of stating 

clearly the limitation of a bargain of this sort," after reviewing 

the various lines of authority in the area. 1 w. Jaeger & s. 

Williston, A Treatise on the Law of Contracts, § 104A at 409-11 

(3d ed. 1957). Even where courts have recognized an implied in 

fact promise made by a buyer to stay in business and to take 

requirements, there still is a recognition that the buyer may in 

good faith cease to have requirements. Id. at 408-11. 

In this instance, the district court correctly recognized, as 

it would appear from Big Horn Coal Co., that 

the obligation to remain in business for the period of 

the contract is not a separate and distinct obligation 

from that of Shoshone's duty to act in good faith and 

deal fairly under the contract. Rather, any obligation 

which Shoshone or any buyer may have to remain in 

business must go hand in hand with the duty of good 

faith. If Shoshone's decision to sell its assets and 

cease business under all the facts and circumstances was 

made in bad faith, then a breach of the contract has 

occurred. 

Rec. vol. II, doc. 210 at 8. Whether a requirements contract is 

analyzed under the u.c.c. 3 or the common law, the general rule is 

3 Wyo. Stat. Ann. § 34-21-223 (1977) provides: 

Output, requirements and exclusive dealings. 

(a) A term which measures the quantity by the output of 

the seller or the requirements of the buyer means such 

actual output or requirements as may occur in good 

faith, except that no quantity unreasonably 

.disproportionate to any stated estimate or in the 

absence bf any estimate to any normal or otherwise 

-17-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 60 
''that a -~equirements buyer does not undertake to manage his 

business in such a way as to establish or maintain any particular 

level of requirements." Lambert Corp. v. Evans, 575 F.2d 132, 138 

(7th Cir. 1978); In re United Cigar Stores Co., 72 F.2d 673, 675 

(2d Cir.) ({T]he obligation on the part of a buyer in a 

requirements contract to continue to have requirements without 

substantial variance is not to be implied more strictly than to 

impose upon him the obligation to act in good faith."), cert. 

denied, 293 U.S. 617 (1934). Accord 1 A. Squillante & J. Fonesca, 

The Law of Modern Commercial Practices§ 3.87 at 352 (rev. ed. 

1981) ("Generally, the buyer in a requirements contract does not 

impliedly promise that he will have needs in order to fulfill his 

requirements contract."). 

In HML Corp. v. General Foods Corp., 365 F.2d 77, 81 (3d Cir. 

1966), the court, in discussing a requirements contract, said: 

The choice lies between implying a promise to correct an 

apparent injustice in the contract, as against holding 

the parties to the bargain which they have made. The 

latter alternative has especial force where the bargain 

is the result of elaborate negotiations in which the 

parties are aided by counsel, and in such circumstances 

it is easier to assume that a failure to make provision 

in the agreement resulted not from ignorance of the 

comparable prior output or requirements may be tendered 

or demanded. 

(b) A lawful agreement by either the seller or the 

buyer for exclusive dealing in the kind of goods 

concerned imposes unless otherwise agreed an obligation 

by the seller to use best efforts to supply the goods 

and the buyer to use best efforts to promote their sale. 

Good faith is defined as follows: 

(xix) "Good faith" means honesty in fact in the conduct 

or transaction concerned: 

Wyo. Stat~ Ann. § 34-21-120 (1977). 

-18-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 61 
problem, but from an agreement not to require it. . . . . The better view, however, is that generally the buyer in 

a requirements contract is required merely to exercise 

good faith in determining his requirements even to the 

extent of a determination to liquidate or discontinue 

the business. The rule is based on a reliance on the 

self-interest of the buyer, who ordinarily will seek to 

have the largest possible requirements. Protection 

against abuse is afforded by penetrating through any 

device by which the requirement is siphoned off in some 

other form to the detriment of the seller. 

(emphasis added). Accord 1 A. Squillante & J. Fonesca, Williston 

on Sales§ 10-4 at 386 (1973) ("Where the buyer has no needs and 

terminates his business, thereby simultaneously terminating the 

contract, the court, in making a determination as to liability of 

the buyer, will look to the good faith of both of the parties to 

the requirements contract.") 4; E. Farnsworth, Contracts§ 7.17 at 

526-29. 

Although the court acknowledges this rule, as it did in Big 

Horn Coal Co., it finds it inapplicable because the rationale for 

the rule purportedly does not apply to this situation. Court's 

Opinion at 29. The rule does apply; however, it just does not go 

far enough for the court. Although a buyer normally will maximize 

requirements consistent with self-interest, as the above passage 

from HML Corp. makes clear, "the requirement of good faith is the 

means by which this is enforced." HML Corp., 365 F.2d at 81. 

Thus, a buyer who eliminates requirements by going out of business 

4 Although the authors acknowledge that one court has implied a 

duty to remain in business, they suggest that finding such a duty, 

merely because the parties have entered into a requirements 

contract, results in the court constructing a contract for the 

pa~ties ... A. Squillante -&-J. Fonesca,· ~illiston on. Sales§ 10-4 at 

386. 

-19-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 62 
may be held liable for damages under the requirements contract, if 

the circumstances indicate bad faith. 

Of course, when a buyer reduces or eliminates his 

requirements from a particular seller, the good faith inquiry is a 

factual one and the burden is on the seller to prove bad faith. A 

"buyer's duty to continue in business is a matter calling 

for close scrutiny of motives." 1 R. Alderman, A Transactional 

Guide to the Uniform Commercial Code at 75 (1983). Indeed, 

because good faith encompasses the requirement that a party act 

honestly, circumstantial evidence is essential "to see what he 

actually had in mind when he did what he did." 2 w. Hawkland, 

U.C.C. Series§ 2-306:02 at 222 (1984). 

Absent a provision to the contrary, a requirements contract 

precludes a buyer from purchasing requirements from other than the 

seller. 3 Corbin on Contracts§ 569 at 338; R. Anderson, Anderson 

on the u.c.c. § 2-306:33 at 526 (1982). Thus, a buyer's reduction 

or elimination of requirements merely to procure requirements more 

cheaply elsewhere is classic bad faith. J. White & R. Summers, 

Uniform Commercial Code§ 3-8 at 125 (2d ed. 1980) ("Of course, if 

it transpires that the buyer is actually procuring his 

requirements more cheaply elsewhere, this is bad faith, and the 

courts will find that it constitutes a breach."). But there are 

situations in which decreasing or eliminating requirements may 

well be consistent with good faith. See,~, Fort Wayne 

Corrugated Paper Co. v. Anchor Hocking Glass Corp., 130 F.2d 471, 

473-74 (3rd Cir. 1942) (shutdown of plant due to lack of demand 

-20-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 63 
for product); In re Unit~d Cigar Stores, 72 F.2d 673 (bankruptcy 

eliminated requirements). 

Application of the good faith rule is perfectly adequate for 

this case. The jury in this case had little difficulty finding 

Shoshone and Pacific liable under the good faith requirements 

standard. Perhaps on retrial no reasonable jury could fail to 

find bad faith given that Shoshone's customers essentially seek to 

purchase their requirements from Pacific. See Empire Gas Corp. v. 

Amercian Bakeries Co., 840 F.2d 1333, 1341 (1988) (liability 

determination upheld despite erroneous jury instruction because no 

reasonable jury could fail to find bad faith); E. Farnsworth, 

Contracts§ 7.17 at 527 ("Some conduct, such as subterfuge and 

evasion, clearly violates the duty [of good faith]."). The court 

simply goes too far when it reads into this contract an implied 

obligation of Shoshone, the buyer, to stay in business for the 

life of the contract. At this s~age, the jury system should be 

allowed to determine liability by applying the duty of good faith 

and fair dealing to the facts. 

Of course, the most serious problem with finding that the 

buyer has an obligation to remain in business is that ,no such 

language appears in the contract and this court-supplied 

obligation goes far beyond the duty of good faith and fair dealing 

implicit in every contract. As noted, it is unlikely that the 

parties ever intended to include such a term. If there is one 

consistent theme in the Wyoming decisions concerning contract 

-21-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 64 
. iQterpretation, it ia that.unambiguous.cont~acts5 are not to be 

rewritten by the court in the guise of interpretation. See,~, 

Arnold v. Mountain West Farm Bureau Mutual Ins. Co., 707 P.2d 161, 

166 (Wyo. 1985); Adobe Oil & Gas Corp. v. Getter Trucking, Inc., 

676 P.2d 560, 562 (Wyo. 1984); Rainbow Oil Co. v. Christmann, 656 

P.2d 538, 545 (Wyo. 1982); McCartney v. Malm, 627 P.2d 1014, 1020 

(Wyo. 1981); Quin Blair Enterprises, Inc. v. Julien Constr. Co, 

597 P.2d 945, 951 (Wyo. 1979); see also State Farm Mutual Auto 

' . 

Ins. Co. v. Petsch, 261 F.2d 331, 335 (10th Cir. 1958) (applying 

Wyoming law). And that is what the court is doing here for an 

ironclad result. The REA and Tri-State could have achieved the 

greater protection the court provides by including a take-or-pay 

provision in the contract, or a provision preventing the buyer 

from selling its business, or a provision making the contract 

binding on the buyer's successors or assigns. See Tang Tranh Trai 

Le & E. Murphy, Sales and Credit Transactions Handbook§ 2.13 

(1985) (express terms concerning quantity variation may be 

desirable in requirements contract to limit seller's risk); L. 

Mandel, The Preparation of Commercial Agreements at 214 cl. 3 

(take-or-pay provision example). 

At the date of contract formation in 1965, the REA and 

Tri-State already had the protection of the good faith 

requirements rule. Merely because another provision offers 

5 An ambiguous contract is one which is obscure in its meaning 

because of indefinite expression or because the expression is 

capable of double meaning. Amoco Production Co. v. Stauffer 

Chemic~l Co.- of Wyoming, 611-P.2d 463, 465 (Wyo. 1985). 

-22-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 65 
greater protection.in hitidsight-is not sufficient reason to go 

beyond the contract in this case. Implied provisions in contracts 

are unnecessary when the contract makes sense as written. The 

interdependent nature of the Tri-State system and long-term 

security for Tri-State's REA loans do not convince me that an 

implied provision to stay in business was ever intended. Indeed, 

almost any time a buyer decreases or eliminates requirements, the 

seller's other customers and creditors may be affected. No good 

reason exists to elevate the REA and Tri-State above the rule for 

ordinary litigants. 

The good faith requirements rule has flexibility and 

precedent to recommend it. It is "an important limitation which 

prevents [the buyer] from acting unreasonably or dishonestly." 2 

w. Hawkland, u.c.c. Series§ 2-306:01 at 221. The rule that the 

court crafts is unnecessary and is overly broad, as is evident by 

the court's atte~pt to qualify it. Court's Opinion at 31 n.15, 

33-34. Also, by holding Shoshone and Pacific liable as a matter 

of law, the court replaces what ought to be a factual inquiry 

(good faith} for a legal one. In discussing an exclusive dealing 

contract under the U.C.C., Wyo. Stat. ,Ann. § 34-21-223 (1977), the 

Wyoming Supreme Court quoted the entire section, which also 

recognizes output and requirements contracts, and concluded that 

"this section creates an inherent question of fact." 

Meuse-Rhine-Ijssel Cattle Breeders of Canada, Ltd. v. Y-Tex Corp., 

590 P.2d 1306, 1310 (Wyo. 1979) (overturning grant of summary 

-judgment}. Yet . the court .ignores "such .authority ... Deciding the 

-23-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 66 
~ontract.issue as a matter of law at this. stage seems inconsistent 

with Wyoming law and unnecessarily augments our appellate power at 

the expense of the jury. 

Thus, I would uphold the district court's denial of the 

permanent injunction and remand the case for a new trial on all 

issues as envisioned by the district court. 

-24-

Appellate Case: 87-2288 Document: 01019961402 Date Filed: 05/05/1989 Page: 67