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

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BEAVER 

v. 

NEVADA 

FlLtjD United States Co!1I1 ~ Appo;.b IN THE UNITED STATES COURT OF APPEALS Tenth Circm, 

FOR THE TENTH CIRCUIT 

CREEK COAL COMPANY, ) 

) 

Plaintiff-Appellee, ) 

) 

) 

) 

POWER COMPANY, ) 

) 

Defendant-Appellant. ) 

ORDER AND JUDGMENT* 

MAY 2 71992 

ROBERT L. HOECKER 

Clerk 

No. 89-4114 

(D . C. No . 87-C-0870W) 

( D . Utah) 

Before HOLLOWAY and MCWILLIAMS, Circuit Judges, and BRATTON,** 

District Judge. 

The primary issue in this appeal is whether the district 

court in the District of Utah erred in interpreting a coal supply 

contract on summary judgment . The court ruled as a matter of law 

that the Equity Clause in the parties' agreement did not 

contemplate the buyer's clai m of inequity based upon an increase 

in the contract price of coal t o a level significantly higher than 

* This order and judgment has no precedential value and shall not 

be cited, or used by any court wi thin the Tenth Circuit, except 

for purposes of establishing the doctrines of the law of the case , res judicata, or collateral estoppel. 10th Cir. R. 36 . 3. 

** The Honorable Howard C. Bratton, Senior United States District 

Judge for the District of New Mexico, sitting by designation. 

Appellate Case: 89-4114 Document: 010110254309 Date Filed: 05/27/1992 Page: 1
the prevailing market price. For essentially the same reasons as 

were given by the district court, we affirm. 

I 

In 1980 an electric utility, Nevada Power Company (Nevada 

Power), as purchaser and Beaver Creek Coal Co. (Beaver Creek) as 

seller concluded a long-term coal supply agreement. By its terms 

the agreement was effective for approximately 15 years, from March 

1980 through December 1994. The contract terms established a base 

price for all coal delivered under the agreement of $20 per ton 

f.o.b. Acco, Utah. Under Section 8 of the contract, the parties 

agreed to make the base price adjustable on the basis of 

variables, including specified United States Department of Labor 

1 statistical indices, royalty rates, labor costs, and taxes. 

In addition to the price Adjustment Clause, the agreement 

contained language the parties describe in general terms as an 

"equity clause." Section 9, entitled "Inequity and Hardship," 

provided: 

1 

The base price was divided into components, each of which was 

subject to adjustment under specified criteria. An 

inflation/deflation component of the base price was subject to 

adjustment by the percentage of change that occurred in the U.S. 

Department of Labor Final Producer's Price Index for Industrial 

Commodities. Coal Supply Agreement Sec. 8(A)(l), at 7 . A 

materials and supplies component of the base price was to be 

adjusted by the percentage of change in the Labor Department Final 

Producer's Price Index for Mining Machinery and Equipment. Id. 

Sec. 8(A)(2), at 7. A royalty rate component of the base price 

was to be adjusted to reflect changes in royalty rates applicable 

to the seller's mines. Id. Sec. 8(A)(3), at 7. A cost of 

employment component was subject to adjustment under a specified 

formula. Id. Sec. 8(A)(4), at 8. The agreement provided for an 

adjustment to reflect increases or decreases in taxes. Id. Sec . 8(A)(5), at 9. Finally, the agreement provided for an adjustment for changes in the seller's costs resulting from changes in 

governmental regulations. Id. Sec. 8(A)(6), at 11. 

2 

Appellate Case: 89-4114 Document: 010110254309 Date Filed: 05/27/1992 Page: 2
It is the intent of the parties hereto that this 

Agreement, as a whole and in all of its parts, shall be 

equitable to both parties throughout its term. The 

parties recognize that omissions or defects in this 

Agreement beyond the control of the parties or not 

apparent at the time of its execution may create 

inequities or hardship during the term of the Agreement, 

and further, that supervening conditions, circumstances 

or events beyond the reasonable and practicable control 

of the parties may from time to time give rise to 

inequities which impose economic or other hardships upon 

one or both of the parties. 

In the event an inequitable condition occurs which 

adversely affects one party, it shall be the joint and 

equal responsibility of both parties to act promptly to 

determine the action required to cure the inequity and 

effectively to implement such action. Upon written 

claim of inequity served by one party upon the other, 

the parties shall act jointly to reach an agreement 

concerning the claimed inequity within sixty (60) days 

of the date of such written claim. The party claiming 

inequity shall include in its claim such information and 

data as may be reasonably necessary to substantiate the 

claim and shall freely and without delay furnish such 

other information and data as the other party reasonably 

may deem relevant and necessary. 

Coal Supply Agreement Sec. 9, at 12-13. The dispute between the 

parties focuses on the intended operation of the Equity Clause in 

relation to the base price Adjustment Clause. 

The parties generally agree that by mid-1987 the base price 

adjustment formulas had increased the contract price to 

approximately $34 per ton, while the market price remained in the 

$20 range. In June 1987, Nevada Power sent a letter to Beaver 

Creek claiming an inequity under Section 8 of the contract, in 

part on the ground that the contract price had "increased to a 

level significantly higher than prevailing market price." II R. 

Doc. 103(a) Ex. F(l). 

Following unsuccessful negotiations between the parties over 

Nevada Power's Section 9 claim, Beaver Creek filed this diversity 

3 

Appellate Case: 89-4114 Document: 010110254309 Date Filed: 05/27/1992 Page: 3
action in the District of Utah in October 1987. In an amended 

complaint Beaver Creek sought, in part, a ruling by a declaratory 

judgment that Nevada Power was not entitled to relief under the 

Equity Clause. IR. Doc. 86. 

In an unpublished Memorandum Decision and Order the district 

court decided that summary judgment interpreting the agreement was 

appropriate because the contract language was unambiguous as a 

matter of law. Without considering extrinsic evidence, the 

district court interpreted the Equity Clause as encompassing two 

categories of inequity claims: "one based on defects or omissions 

in the Agreement and one based upon supervening conditions, 

circumstances or events." III R. Doc. 141, at 8. The court 

concluded that Nevada Power had not presented valid claims within 

either category. The district court then entered final judgment 

in favor of Beaver Creek. Id. Doc. 163. 2 

We review a district court's ruling on a motion for summary 

judgment de nova, applying the same standard that the district 

judge used. Osgood v. State Farm Mut. Auto Ins. Co . , 848 F.2d 

141, 143 (10th Cir. 1988). On summary judgment, we view all 

proffered summary judgment materials in the light most favorable 

to the non-moving party. Id. Summary judgment is proper only if 

the moving party has shown that there are no genuine issues of 

2 

The district court granted partial summary judgment in favor 

of Beaver Creek on the third and fifth claims for relief in Beaver 

Creek's amended complaint. III R. Doc . 141, at 17. In the same 

order, the district court dismissed with prejudice the second 

claim for relief in Nevada Power's amended counterclaim. Id. The 

district court certified the case for appeal pursuant to Rule 

54(b) of the Federal Rules of Civil Procedure. Id. Doc. 163 . 

4 

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material fact and that it is entitled to judgment as a matter of 

law. Fed. R. Civ. P. 56(c). 

II 

Nevada Power contends that summary judgment was improper 

because it proffered extrinsic evidence of the parties' intent 

that created genuine issues of material fact over the meaning of 

the contract language. However, under the general rules of 

contract interpretation that Utah follows, a court must attempt to 

determine the intended meaning of a contract from the plain 

language of the instrument before considering extrinsic evidence 

about the parties' intended meaning. See, e.g., Plateau Mining 

Co. v. Utah Div. of State Lands & Forestry, 802 P.2d 720, 725 

(Utah 1990); Utah Valley Bank v. Tanner, 636 P.2d 1060, 1061-62 

(Utah 1981). If the meaning of a contract is clear and 

unambiguous, extrinsic evidence generally is not admissible to 

explain the parties' intent. ~, Faulkner v. Farnsworth, 665 

P.2d 1292, 1293 (Utah 1983). Thus, we must address first the 

district court's ruling that the contract language was unambiguous 

as a matter of law. See, e.g., Gomez v. American Elec. Power 

Serv. Corp., 726 F.2d 649, 651 (10th Cir. 1984) (applying Utah 

law); Faulkner, 665 P.2d at 1293; Morris v. Mountain States Tel. & 

Tel. Co., 658 P.2d 1199, 1200 (Utah 1983). 

If the language of a contract is unambiguous, a court may 

appropriately enter summary judgment on the issue of 

interpretation. See Gomez, 726 F.2d at 651. See generally 

Charles A. Wright et al., Federal Practice and Procedure§ 2730.1, 

at 280-81 (2d ed. 1983) (explaining construction of contract may 

5 

Appellate Case: 89-4114 Document: 010110254309 Date Filed: 05/27/1992 Page: 5
properly be decided on summary judgment if parties' intentions are 

not at issue). However, an ambiguous contract cannot be 

interpreted on summary judgment if genuine issues of material fact 

exist over the parties' intended meaning. ~, Gomez, 726 F.2d 

at 651. 

Nevada Power seeks to demonstrate that the language of the 

Equity Clause 

differing, yet 

"contract is 

is ambiguous because the 

reasonable, 

ambiguous if 

interpretations. 

it is capable 

parties presented 

In general, a 

of more than one 

reasonable interpretation because of 'uncertain meanings of terms, 

missing terms, or other facial deficiencies.'" Winegar v. Froerer 

Corp., 813 P.2d 104, 108 (Utah 1991) (quoting Faulkner, 665 P.2d 

at 1293). The Equity Clause is not ambiguous as a matter of law 

merely because the parties have offered different interpretations. 

See, e.g., Plateau Mining Co., 802 P.2d at 725. Rather, the 

parties' differing interpretations of the contractual language 

must each be tenable in order to create ambiguity as a matter of 

law. See, e.g., Plateau Mining Co., 802 P.2d at 725. 

Nevada Power contends that the parties intended the base 

price Adjustment Clause "to approximate Beaver Creek's costs of 

production." Appellant's Brief at 15. Further, Nevada Power 

contends that the parties intended for the Equity Clause "to 

operate if the contract price failed to approximate Beaver Creek's 

costs of production." Id. at 19. 

In interpreting the agreement, we must apply the general rule 

of contract interpretation that requires us to attempt to 

interpret an instrument based upon the plain language, by reading 

6 

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each provision "in relation to all of the others, with a view 

toward giving effect to all and ignoring none." Utah Valley Bank, 

636 P.2d at 1061-62. Our reading of the contract as a whole 

convinces us that the parties did not intend for Section 9 to 

address claims of inequity resulting merely from a disparity 

between market and contract price such as developed here. We thus 

conclude that the district court was not in error in ruling that 

the contract was unambiguous. 

We do not view the Nevada Power interpretation as reasonable. 

We reach this conclusion in part on the basis of the base price 

adjustment provisions in Section 8. The contract language 

indicates that the parties intended to tie the price to variables 

other than the market price. We agree with appellee Beaver 

Creek's argument that the contract does not indicate that the 

parties intended the contract price to approximate the market 

price or to track its production costs. Some other mechanism 

designed to determine the actual market price of coal and to track 

Beaver Creek's production costs could have been fashioned to do 

that. Furthermore, the contract contained no price-reopener 

provision. We would effectively rewrite the price formula in the 

contract if we interpreted the language to mean that one party was 

free to reopen price negotiations through the Equity Clause 

because the contract price did not track the market price. 

III 

We next address whether the district court properly granted 

summary judgment respecting this contract controversy. Concerning 

the first cate gory of claims within the Equity Clause, 

7 

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the district court concluded that "a party must establish, among 

other things ... the existence of a defect or omission [and] 

. . . that the defect or omission was beyond the control of the 

parties or not apparent at the time of the contract's execution." 

III R. Doc. 141, at 9. Applying a mutual mistake analysis, the 

district court held that Nevada Power had not established a claim 

of a defect or omission in part because it was 

Beaver Creek's intent was clearly reflected 

apparent that 

in the written 

agreement and that Beaver Creek did not share with Nevada Power a 

mutual intent contrary to the agreement. Id. at 10-11. The court 

ruled also that Nevada Power had failed to show a defect or 

omission that was either beyond the parties' control or not 

apparent at the time they executed the contract. Id. at 11. The 

court decided that the detailed price adjustment formulas in 

Section 8 showed that "the parties' mutual intent was to structure 

price adjustments independent of the market price." Id. at 11-12. 

We agree with the district court's reading of the 

requirements for a claim based on a defect or omission. The 

district court's interpretation of the clause is the proper 

interpretation based on the plain language . Moreover, we agree 

with the district court's conclusion that Nevada Power's claim of 

inequity based upon a market price/contract price disparity was 

not a defect or omission not apparent to the parties at the time 

the agreement was executed. As the district court observed, the 

language of the agreement indicates that the parties intended to 

structure a pricing formula independent of the market price. 

8 

Appellate Case: 89-4114 Document: 010110254309 Date Filed: 05/27/1992 Page: 8
The district court further concluded that in order to prove 

claims based on inequities resulting from "supervening 

conditions," a party would be required to "show the 

'supervening conditions, circumstances or events 

existence 

beyond 

of 

the 

reasonable control of the parties.'" III R. Doc. 141, at 9. The 

court defined supervening to mean "unlooked-for or unforseeable." 

Id. at 13. The court concluded that Nevada Power's claim of 

inequity was not within Section 9 because a change in the market 

price of coal during the 15-year term of the contract could 

reasonably have been anticipated by the parties. Id. at 13-14. 

We believe the district court's interpretation of the word 

"supervening" is reasonable. The rest of the phrase -- "or events 

beyond the reasonable and practicable control of the parties" --

demonstrates the parties' intent. The inequity that Nevada Power 

claims here was reasonably and practicably within the parties' 

control to address; the parties could have tied the contract price 

to the market price by another contractual mechanism. 

Nevada Power relies on Aluminum Company of America v. Essex 

Group, Inc., 499 F. Supp. 53 (W.D. Pa. 1980). Nevada Power argues 

that the ALCOA opinion distinguished fixed price cases from the 

type of indexed price agreement in ALCOA; it says the ALCOA 

opinion rejected the idea that ALCOA was bound inescapably by the 

contract to bear the risk of divergence of the market price. 

Nevada Power reasons that here it entered into a contract with 

Beaver Creek with a similar sophisticated price formula, including 

a combination of government indices and actual costs to limit 

risks; that the district court here failed to address the 

9 

Appellate Case: 89-4114 Document: 010110254309 Date Filed: 05/27/1992 Page: 9
interaction between the Equity Clause and the Adjustment Clause 

and mistakenly applied fixed-price contract doctrine. Appellant's 

Brief at 37-38. 

We are not persuaded by the argument built on the ALCOA 

opinion. That decision was based on findings of mutual mistake, 

impracticability, and frustration of purpose. ALCOA, 499 F. Supp. 

at 63, 73, 78. Those grounds for relief are not shown here. 

ALCOA has generally not been found convincing by other courts. 

See United States v. Southwestern Elec. Coop., Inc., 869 F. 2d 

310, 315 n.7 (7th Cir. 1989); Printing Indus. Ass'n v. 

International Printing & Graphic Communications Union, 584 

F. Supp. 990, 998 (N.D. Ohio 1984) (quoting Wabash, Inc. v. Avnet, 

Inc., 516 F. Supp. 995, 999 n.6 (N.D. Ill. 1981) ("Under the 

logical consequences of [ALCOA] there would be no predictability 

or certainty for contracting parties who selected a future 

variable to measure their contract liability")). We feel such 

reasoning is persuasive here where the parties did not opt for a 

price-reopener provision and indicated instead their choice of 

stability in the contractual relationship, with the Adjustment 

Clause and the Equity Clause provisions serving as limited grounds 

for relief not justified here. 

IV 

Nevada Power argues that the district court also erred in 

rulings it made on discovery motions of Nevada Power. These 

motions "sought discovery relating to what [Nevada Power] believed 

were the ultimate issues of this case -- Beaver Creek's costs of 

production and the market price of coal." 

10 

Appellant's Brief at 

Appellate Case: 89-4114 Document: 010110254309 Date Filed: 05/27/1992 Page: 10
44. In light of our conclusion agreeing with the interpretati on 

of the coal agreement by the district judge, those subjects were 

irrelevant. The contract was not tied to the costs of production 

or the market price of coal. Hence there was no error in the 

discovery rulings. 

AFFIRMED. 

11 

Entered for the Court 

William J. Holloway, Jr. 

Circuit Judge 

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