Case Name: NORTHERN HELEX COMPANY v. The UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1980-10-22
Citations: 634 F.2d 557
Docket Number: No. 454-70
Parties: NORTHERN HELEX COMPANY v. The UNITED STATES.
Judges: Before FRIEDMAN, Chief Judge, and DAVIS, NICHOLS, KUNZIG and SMITH, Judges, en banc.
Reporter: Federal Reporter 2d Series
Volume: 634
Pages: 557–566

Head Matter:
NORTHERN HELEX COMPANY v. The UNITED STATES.
No. 454-70.
United States Court of Claims.
Oct. 22, 1980.
Clarence T. Kipps, Jr., Washington, D. C., attorney of record, for plaintiff. John Lloyd Rice, Miller & Chevalier, Washington, D. C., F. Vinson Roach and Dean W. Wallace, Omaha, Neb., of counsel.
Edward J. Friedlander, Washington, D. C., with whom was Asst. Atty. Gen. Alice Daniel, Washington, D. C., for defendant. John D. Trezise, Dept, of the Interior, Washington, D. C., of counsel.
Before FRIEDMAN, Chief Judge, and DAVIS, NICHOLS, KUNZIG and SMITH, Judges, en banc.

Opinion:
ON DEFENDANT'S EXCEPTIONS TO THE TRIAL JUDGE'S OPINION
FRIEDMAN, Chief Judge:
This is the third time this case has been before us. It involves the amount of damages to which the plaintiff is entitled for the government's breach a decade ago of a contract under which the plaintiff agreed to produce and supply helium to the government. The government has challenged the recommended decision of Trial Judge Spec-tor, rendered on remand following our reversal of his prior decision awarding damages that we held were excessive because based on erroneous legal principles. In his latest decision the trial judge ignored our prior decision and recommended that damages be awarded on the same legal theories that we rejected in the prior case, but in a significantly greater amount than he previously had recommended.
We hold that, our prior decision is the law of the case, and we follow it. We conclude, however, that the government has failed to prove one element for which we ruled in our prior decision that damages could be reduced.
I.
The government's termination of the helium purchase program, of which the plaintiff's contract was a part, has been the subject of substantial litigation, both in this court and in others. See Northern Helex Co. v. United States (Northern Helex II), 207 Ct.Cl. 862, 524 F.2d 707 (1975), cert. denied, 429 U.S. 866, 97 S.Ct. 176, 50 L.Ed.2d 146 (1976); Northern Helex Co. v. United States (Northern Helex I), 197 Ct.Cl. 118, 455 F.2d 546 (1972); Phillips Petroleum Co. v. United States, No. 248-76 (Ct.Cl. Sept. 12, 1980); Cities Service Helex, Inc. v. United States, 211 Ct.Cl. 222, 543 F.2d 1306 (1976); National Helium Corp. v. Morton, 486 F.2d 995 (10th Cir. 1973), cert. denied, 416 U.S. 993, 94 S.Ct. 2405, 40 L.Ed.2d 772 (1974); National Helium Corp. v. Morton, 455 F.2d 650 (10th Cir. 1971). It is unnecessary to restate all of the facts pertaining to the helium purchase program; instead, we sketch the basic factual history and describe the procedural situation relevant to our decision.
In 1961, the government entered into longterm contracts with four natural gas producers to obtain helium, a by-product of natural gas production, which it wanted for conservation purposes. The four producers constructed helium processing plants as part of integrated natural gas production facilities. In 1969, the government ceased paying the amounts due under the contracts, and in 1970, Northern Helex brought suit in this court, alleging a breach. Because of the integrated nature of the plaintiff's operations, it has necessarily continued to use its helium plant to remove helium from the natural gas. In some instances, it found another purchaser for the helium; on other occasions, it has justifiably vented the helium into the atmosphere as a waste product.
In Northern Helex I, supra, we held that the government had materially and totally breached its contract with Northern Helex and that Northern Helex had not waived the breach and was justified in treating the contract as terminated. 197 Ct.Cl. at 134, 455 F.2d at 555-56. We expressly left open all issues relating to damages and returned the case to the Trial Division for an initial determination of those issues.
Trial Judge Spector thereafter recommended that the plaintiff recover the full contract price, including the costs of continued performance, for the remainder of the contract term, less the amounts received from sales to a third party after the breach, storage expenses, and payments made for deliveries after suit was filed. 20 Cont.Cas. Fed. 89,085, 89,132 (Ct.Cl. Trial Div.1974). On en banc review of that recommended decision, however, the court "reach[ed] a somewhat different result." Northern Helex II, supra, 207 Ct.Cl. at 868 n.1, 524 F.2d at 709 n.1.
We held that "the plaintiff is not entitled to recover its cost of performance . of the contract to the end of the contract period" (id. at 878, 524 F.2d at 715), that the price escalation clause in the contract, triggered by changes in the wholesale price index, was inapplicable, and that certain excess values, at that time not yet demonstrated, would be nonrecoverable by the plaintiff. We set forth a six-step process for determining the damages to be awarded (id. at 888-90, 524 F.2d at 721-22), and remanded the case for the trial judge to make the recommended findings of fact and calculations necessary to carry out that six-step process.
On remand, however, the trial judge made no attempt to comply with our explicit instructions for computing damages. Instead, he returned to the theory of damages that we rejected in Northern Helex II. He stated that "[o]nly payment of the contract price, reduced by the proceeds of any resale of helium to others, will place the plaintiff in as good a position as it would have been in had the contract been fully performed" (which is the admitted standard, see note 5, supra). He then recomputed the damages, using the same method he had used in his first opinion and that we had explicitly rejected in Northern Helex II. He increased the total damages to reflect changes in the wholesale price index that triggered the contract's escalator clause (which we had held does not apply in the event of breach). The trial judge recommended an award to the plaintiff of $94,-839,000, "subject to further adjustment by reason of proceeds received by plaintiff on the resale of helium to others subsequent to December 24, 1970."
II.
It is "familiar doctrine that a lower court is bound to respect the mandate of an appellate tribunal and cannot reconsider questions which the mandate has laid to rest." Federal Communications Commission v. Pottsville Broadcasting Co., 309 U.S. 134, 140, 60 S.Ct. 437, 440, 84 L.Ed. 656 (1940). "[A]n inferior court has no power or authority to deviate from the mandate issued by an appellate court." Briggs v. Pennsylvania Railroad Co., 334 U.S. 304, 306, 68 S.Ct. 1039, 1040, 92 L.Ed. 1403 (1948). After an appellate court has decided a case and remanded to a lower court, the latter court "is bound by the decree as the law of the case; and must carry it into execution . That court cannot vary it, or examine it for any other purpose than execution; . or review it, even for apparent error, upon any matter decided on appeal . " In re Sanford Fork & Tool Co., 160 U.S. 247, 255, 16 S.Ct. 291, 293, 40 L.Ed. 414 (1895). Indeed, the rule that a lower court must carry out the mandate of an appellate court is so well established that a writ of mandamus may issue to compel such action. General Atomic Co. v. Felter, 436 U.S. 493, 497, 98 S.Ct. 1939, 1941, 56 L.Ed.2d 480 (1978); In re Sanford Fork & Tool Co., supra.
The obligation of a lower court to carry out the mandate of an appellate court exists where the appellate and lower tribunals are separate and independent judicial bodies. A fortiori, a trial judge of this court, who is not an independent judicial entity, has the same obligation.
In the present case, Trial Judge Spector blatantly disregarded this settled principle in considering this case following our remand in Northern Helex II. Instead of carrying out the duties that our judgment directed him to perform, he simply ignored our decision and proceeded instead to decide the case as he deemed proper and as if our decision never had been rendered. For example:
Although we directed that in determining the plaintiff's anticipated profits from the contract there must be subtracted from the total anticipated revenues under the contract of $80,255,000 "the total stipulated anticipated manufacturing costs of $43,067,-413 that the plaintiff would have expended to the end of the contract term" (207 Ct.Cl. at 887, 524 F.2d at 721-22 (1975)), the trial judge did not make the subtraction.
Although we directed that the Wholesale Price Index escalation clause of the contract "should not be applied after the date of the breach" (207 Ct.Cl. at 890, 524 F.2d at 722), the trial judge applied the escalation clause and thereby substantially increased the damages.
Although we directed that the plaintiff's anticipated profits on the contract should be "discounted to current value as of the date of entry of final judgment" (207 Ct.Cl. at 890, 524 F.2d at 722), the trial judge concluded that "[a]t this late date in the term of a 22-year contract, no 'discount to present value' is warranted."
Although we directed that there should be subtracted from the plaintiff's total anticipated revenues under the contract any excess value of the helium plant at the time of breach (207 Ct.Cl. at 889, 524 F.2d at 721), the trial judge ruled that "so-called 'excess values' have no relevance whatever in the event of a total and material breach of contract by the Government." (We discuss the excess value issue in section III.B. below.)
The result of the trial judge's failure to comply with our decision was that although in his prior decision he recommended damages of $78,012,142, which we rejected as excessive because based upon erroneous legal theories, in his decision on the remand he applied those same rejected legal theories and this time recommended damages of more than $94 million. This was $16 million greater than his previous award, which we had found was excessive.
The ostensible justification the trial judge gave for this extraordinary action was that portions of our opinion in Northern Helex II were inconsistent with our opinion in Northern Helex I. We discern no inconsistency. The trial judge's contrary view stems from his taking certain statements in Northern Helex I out of context and then treating them as the rationale of that decision. In any event, if there were any inconsistencies, the latter opinion, Northern Helex II, would have to be viewed as overruling or modifying Northern Helex I sub silentio. It was not the province of the trial judge to ignore the critical and considered rulings in Northern Helex II because he deemed them inconsistent with the earlier decision or found them unconvincing. If the trial judge had any doubt about what Northern Helex II held or required him to do on the remand, he could have requested further guidance from the court.
Trial Judge Spector obviously believed that our decision in Northern Helex II was wrong and that his prior recommended decision that we reversed was correct. We assume that it is not unusual for a trial judge to believe that an appellate court's reversal of his decision was erroneous, and perhaps grossly so. That belief, however, provides no justification for the trial court's refusal to comply with the appellate court's instructions.
We expect and insist that the trial judges of this court comply with the instructions and orders of the court, whatever may be their personal view of those rulings. If a trial judge is unable to do so as a general matter, the appropriate course for him would be to submit his resignation. He cannot, however, consistent with his obligations as a trial judge of this court, ignore or fail to comply with the directions of the court merely because he disagrees with them or believes they are wrong.
III.
A. Although the plaintiff argues that our decision in Northern Helex II was erroneous and urges us not to follow it, the threshold question is not the correctness vel non of that decision, but whether that decision is the law of the case and therefore binding upon us. We conclude that it is.
In our recent opinion in United States v. Turtle Mountain Band of Chippewa Indians, 222 Ct.Cl. -, 612 F.2d 517 (1979), we undertook an in-depth exploration of the law-of-the-case doctrine. What we stated there applies equally to this case.
The issue in Turtle Mountain Band was the correctness of our earlier decision with respect to the date of extinguishment of the plaintiff Indians' aboriginal title to a certain tract of land. We did not reach the merits of the government's claim that we had erred in our first determination on this point; instead, we regarded that determi- ' nation as the law of the case and therefore binding, and declined to consider any of the government's substantive arguments. We described the law-of-the-case principle as "a matter of sound judicial practice, [under which] a court generally adheres to a decision in a prior appeal in the same case unless one of three 'exceptional circumstances' exists: 'the evidence on a subsequent trial was substantially different, controlling authority has since made a contrary decision of the law applicable to such issues, or the decision was clearly erroneous and would work a manifest injustice.' " Id. 222 Ct.Cl. at -, 612 F.2d at 521 (quoting White v. Murtha, 377 F.2d 428, 431 (5th Cir. 1967)). Since none of these exceptions was present, our initial determination was thus "impervious to challenge on subsequent appeals." Id. 222 Ct.Cl. at-, 612 F.2d at 520.
Again in this case, our previous decision controls unless one of the three exceptions exists. We need to explore here only one of these three exceptions. There has been no change in the applicable law since Northern Helex II. Although the trial judge conducted a second evidentiary hearing and made an additional 106 findings of fact, the facts now before us relating to the issues we decided in 1975 are essentially the same as those we then considered.
Thus, the only question is whether our decision in Northern Helex II is clearly erroneous and works a manifest injustice. The standard under this exception is a stringent one. As "we stated in Turtle Mountain Band: "The purpose of the law-of-the-case principle is to provide finality to judicial decisions. A strong showing of clear error therefore is required before a court should reexamine its decision in the prior appeal." 222 Ct.Cl. at-, 612 F.2d at 521. A mere suspicion of error, no matter how well supported, does not warrant reopening an already decided point. See id. Only if we were convinced to a certainty that our prior decision was incorrect would we be warranted in now reexamining Northern Helex II.
Such "strong showing of clear error" has not been made. Nothing the plaintiff asserts or shows convinces us that our 1975 decision was clearly incorrect.
An important reason for our refusal to reconsider our earlier decision in Turtle Mountain Band-the government's failure to make any new arguments on the issues involved-is equally pertinent here. With the exception of its arguments pertaining to excess values, which we discuss in section III.B. infra, all of the points the plaintiff now makes in support of its position were fully argued in the prior case. The adequacy of the plaintiff's prior presentation is demonstrated by the trial judge's acceptance at trial of those contentions, and the fact that they convinced one member of the court, who dissented in Northern Helex II. Our lengthy and detailed opinion in that case addressed the plaintiff's material arguments and explained why we rejected them. The plaintiff has not presented any new arguments that were not fully canvassed and evaluated before, nor placed the issues in a different context that provides insights and illuminations not previously available.
In Zdanok v. Glidden Co., 327 F.2d 944, 952 (2d Cir.), cert. denied, 377 U.S. 934, 84 S.Ct. 1338, 12 L.Ed.2d 298 (1964), the court refused to disturb an earlier decision in that litigation despite doubt created by a conflicting Sixth Circuit opinion, "particularly when superimposed on Chief Judge Lumbard's earlier dissent here and the great amount of critical discussion in the law reviews that our decision has engendered." The claims of error here are not as compelling as those in Zdanok, and do not create the doubt found in that case. We know nothing now that we did not know 5 years ago. We have no reason not to treat that earlier decision as the law of the case.
B. In Northern Helex II we stated that there should be subtracted from the total anticipated revenues under the contract not only the total stipulated anticipated manufacturing costs of $43,067,413, but also "any" "excess" value the helium plant had, reflecting (1) the amount by which the fair market value of the plant at the time of breach exceeded its depreciated original cost, and (2) the fact that the plant would continue to function as part of the plaintiff's integrated operation. 207 Ct.Cl. at 888-89, 524 F.2d at 721. We stated (id. 207 at 889, 524 F.2d at 721):
The sum of these two values represents the total excess value of the plaintiff in its helium plant that has not been expended nor exhausted by the performance of the contract with the Govern ment, but is an asset or benefit conferred on the plaintiff by its performance of the Government contract and which it owned, possessed, and used at the time of the breach and still owns, possesses, and uses and will continue to own, possess, and use in the future in its integrated operations.
We further ruled that there should be deducted from the plaintiff's anticipated profits, calculated as there provided,
any other savings to it by its non-performance of the contract because of the breach. The resulting figure, discounted to current value as of the date of entry of final judgment, should place the plaintiff in as good a position as it would have been in had the contract been fully performed.
Id. 207 at 890, 524 F.2d at 722.
Our ruling that the "excess" value of the plant should be subtracted from total anticipated revenue was intended to require the subtraction of only any excess value that resulted from the breach, as distinguished from excess plant value resulting from the contract itself. As we noted, the purpose of the damage award was to "place the plaintiff in as good a position as it would have been in had the contract been fully performed." The award was not intended to put the plaintiff in a better position. To the extent that the breach itself made the plant more valuable to the plaintiff, the damages were to be reduced by that increase in value, in accordance with the general rule that the injured party in a breach-of-contract action cannot recover for any benefits it realized from the breach.
We did not intend, however, that the amount of damages should be reduced to reflect increases in the value of the plant that either resulted from the performance of the contract or occurred after the breach but not because of it. In other words, the plaintiff is entitled to recover the full measure of the bargain it made with the government, including any particular values the plant constructed under the contract had for it. Its entitlement is to be made whole for the damages it suffered from, but not to make a profit from, the breach.
The record does not show that the breach itself increased the value of the plant. The only evidence the government submitted on this issue shows that the contracts themselves made the plant more valuable to the plaintiff than the cost of the plant. This evidence, however, is insufficient to warrant reducing the damages by the amount of such excess. There is no adequate reason to believe that plaintiff could have realized on this "excess value" by selling or disposing of the plant at this fair market value without concomitantly harming its other activities. Accordingly, there is no excess value to be subtracted from the total anticipated revenue, which under steps (1) and (2) of the formula provided in Northern Helex II were to be used to reduce the award.
IV.
The only remaining step is to determine the actual amount of damages, pursuant to the six-step formula in Northern Helex II, supra, 207 Ct.Cl. at 888-90, 524 F.2d at 721-22.
(1) and (2) As shown in the preceding section, both of these items are zero.
(3) The sum of (1) and (2) is therefore also zero.
(4) The sum of (3) (;. e., zero) and the amount of total stipulated anticipated manufacturing costs (/. e., $43,067,413) is $43,-067,413.
(5) That amount when subtracted from the total anticipated revenues of $80,255,-000, yields anticipated profit of $37,187,587.
(6) From anticipated profit, we deduct the proceeds of the sale of helium to Kansas Refined Helium ($2,872,547). We left open the possibility that the plaintiff might prove expenses themselves deductible from the sales proceeds; it did not do so, how ever. We also deduct the savings of $11,000 per year that the plaintiff would have received if it had not operated the helium plant. The contract was breached on December 24, 1970, and it would have terminated without breach on August 15, 1983. The period for which the plaintiff would have received this cost savings is therefore 12 years, 7 months, and 22 days. The total savings amount to $139,051. The government has not shown any other savings resulting from its breach and is not entitled to any further deductions.
Anticipated profit less the above two deductions yields a final amount of $34,175,-989. This "resulting figure, discounted to current value as of the date of entry of final judgment should place the plaintiff in as good a position as it would have been in had the contract been fully performed." Id. 207 at 890, 524 F.2d at 722. All that remains before entry of final judgment, therefore, is to determine how much to discount that final amount.
We use a discount rate of 9 percent (derived from currently available conservative investment instruments) and an assumed date of final judgment of October 31, 1980. The applicable discount is $718,589. The plaintiff is therefore entitled to recover $33,457,400.
. The necessary findings of fact are contained in this opinion.
. The plaintiff and the trial judge both state that the court has confused the identity of the plaintiff in this lawsuit by not distinguishing between Northern Helex (the plaintiff) and Northern Natural Gas (its parent). We understand the relationship between the plaintiff and its parent and their respective roles in the transactions involved. For ease of presentation here, however, we will treat them as a single entity when discussing the factual background of the case.
. In 1971, the government announced that it was terminating all four contracts, at which point the other three producers brought suit in district court seeking specific performance. Subsequently, separate suits seeking damages for breach have been filed in this court by the other three companies.
. We required the determination of two types of excess values, which were to be added together and then added to the stipulated anticipated manufacturing costs ($43,067,413). That sum was to be subtracted from the anticipated revenues between the breach and the end of the contract term (which the court held to be $80,255,000) to yield anticipated profits. From anticipated profits would be subtracted the proceeds of the sale to a private purchaser ($2,872,547 less expenses) and any savings accruing to the plaintiff because of the breach.
. The trial judge accepted our basic holding that common-law rules of contract damages apply, under which the injured party is to be put in as good a position as he would have been in if the contract had been completely performed. 207 Ct.Cl. at 875, 524 F.2d at 713.
. In his Memorandum of Pretrial Conference filed August 9, 1978, Trial Judge Spector stated that "[t]he trial will essentially be addressed to the issues of 'excess values,' and the KRH $2.87 million sale," which were factual issues left open by our 1975 opinion. The parties' stipulation, attached to the trial judge's memorandum, is entirely directed to those issues. The trial judge's additional factual findings are consistent with his first set of findings and seem to have been based on the record developed at the first trial.
. This rule normally arises when the plaintiff could avoid losses by ceasing its performance (or does avoid losses by ceasing performance), and is applied in this context in this case on page 11, infra. See Restatement (Second) of Contracts § 361(d) (Tent. Draft No. 14, 1979).