Court Opinion

ID: 4311295
Source: CourtListenerOpinion
Date Created: 2018-09-11 18:38:45.806684+00
Date Added: 2024-06-11T14:44:13.023839
License: Public Domain

[Cite as Gatling Ohio, L.L.C. v. Allegheny Energy Supply Co., L.L.C., 2018-Ohio-3636.]

                             IN THE COURT OF APPEALS OF OHIO

                                  TENTH APPELLATE DISTRICT

Gatling Ohio, LLC,                                   :

                 Plaintiff-Appellant/                :
                 Cross-Appellee,
                                                     :                      No. 17AP-188
v.                                                                      (C.P.C. No. 13CV-6206)
                                                     :
Allegheny Energy Supply Co., LLC,                                    (REGULAR CALENDAR)
                                                     :
                 Defendant-Appellee/
                 Cross-Appellant.                    :

                                           D E C I S I O N

                                   Rendered on September 11, 2018

                 On brief: Meyer & Wilson Co., LPA, Matthew R. Wilson, and
                 Michael J. Boyle, Jr.; Bailess Smith PLLC and Rodney A.
                 Smith; Bailey & Glasser, LLP, Brian A. Glasser, and Maryl C.
                 Sattler, for appellant/cross-appellee Gatling Ohio, LLC.
                 Argued: Brian A. Glasser.

                 On brief: Roetzel & Andress, LPA, Stephen D. Jones, and
                 Jeremy S. Young; Meyer, Unkovic & Scott LLP, Russell J.
                 Ober, Jr., and Andrew L. Noble, for appellee/cross-appellant
                 Allegheny Energy Supply Co., LLC. Argued: Russell J. Ober,
                 Jr.

                  APPEAL from the Franklin County Court of Common Pleas

HORTON, J.
        {¶ 1} Plaintiff-appellant/cross-appellee, Gatling Ohio, LLC ("Gatling"), and
defendant-appellee/cross-appellant, Allegheny Energy Supply Co., LLC ("Allegheny"), both
appeal from the judgment of the Franklin County Court of Common Pleas. The trial court
rejected Gatling's claim that Allegheny breached a coal sales agreement by refusing to
accept coal from a substitute source, but awarded damages to Gatling arising from unpaid
charges for coal that Allegheny had accepted. For the reasons set forth below, we affirm the
No. 17AP-188                                                                                  2

trial court's judgment in all respects except for the discrete issue of the prejudgment interest
rate, and reverse and remand solely for the trial court to apply the parties' contractually
agreed upon rate of interest for damages.
I. FACTUAL AND PROCEDURAL BACKGROUND
       {¶ 2} This is the second appeal in this litigation. In Gatling Ohio, LLC v. Allegheny
Energy Supply Co., LLC, 10th Dist. No. 15AP-221, 2015-Ohio-5548, ¶ 3-12 (hereinafter
"Gatling I"), we set forth the following summary of the factual background of this dispute:
              Under a Coal Sales Agreement ("CSA"), Gatling agreed to
              supply Allegheny a "Base Amount" of coal per year, for several
              years. (CSA, Section 1.1.) Specifically, the parties amended the
              CSA to require Gatling to supply 191,000 tons of coal in 2009,
              720,000 tons of coal in 2010 with 360,000 tons excised,
              1,000,000 tons of coal in 2011, and 439,000 tons of coal in the
              first nine months of 2012.

              The parties set a "Base Price" for the coal in the CSA dependent
              on the coal meeting specified Btu and sulfur content standards.
              (CSA, Section 7.1.) Variations in the Btu or sulfur content of the
              coal triggered compensation to either party, calculated by
              applying applicable quality adjustments to arrive at an
              "Adjusted Base Price." (CSA, Sections 7.2-7.3.) In other words,
              under the CSA, if the Btu of the delivered coal exceeded the
              contract standard, Gatling would be compensated, while if the
              Btu of the delivered coal fell below the contract standard,
              Allegheny would be compensated.

              At the end of 2010, Gatling provided Allegheny with written
              notice of Gatling's election to furnish coal from a mine other
              than the "Source Mine" stated in the CSA, as permitted under
              Section 1.2 of the CSA. Specifically, Gatling elected to source
              between 360,000 and 475,000 tons of coal from the "Alpha"
              mine during the 2011 calendar year, at the "Base Price" set in
              Section 7.1 of the CSA. (2011 Substitution Agreement, 1.)
              Further, the 2011 substitution agreement provided that:

              In order to make Allegheny commercially neutral relative to the
              Alternative Source Coal, the Base Price for Alternative Source
              Coal shall be subject to adjustment as set forth in the [CSA]
              except that * * * Allegheny shall have no obligation to pay any
              premium under Section 7.2 of the Agreement for Alternative
              Source Coal having a monthly weighted average Typical Btu
              specification exceeding 12,000 Btu/lb.
No. 17AP-188                                                                    3

           (2011 Substitution Agreement, 1.) Allegheny signed the notice,
           consenting to the arrangement "provided the [substitute coal]
           is supplied in strict accordance with the [2011] notice." (2011
           Substitution Agreement, 2.) In 2011, Gatling delivered and
           Allegheny accepted coal from the substitute mine, and
           Allegheny did not pay Btu adjustments above the base price.

           At the end of 2011, Gatling provided Allegheny with another
           written notice of its election to source between 400,000 and
           500,000 tons of coal from a mine other than the "Source Mine"
           stated in the CSA during the 2012 calendar year, at the "Base
           Price" set in Section 7.1 of the CSA. (2012 Substitution
           Agreement, 1.) This time, the 2012 substitution agreement did
           not include a paragraph eliminating Allegheny's obligation to
           pay Btu adjustments. Further, the 2012 substitution agreement
           closed by stating that "[c]apitalized terms not set forth herein
           shall have the meaning given them in the Agreement, which
           shall continue in full force and effect in accordance with its
           terms." (2012 Substitution Agreement, 1.) Allegheny again
           signed the notice, consenting to the arrangement "provided the
           [substitute coal] is supplied in strict accordance with the [2012]
           notice." (2012 Substitution Agreement, 2.)

           From January through July 2012, Gatling delivered and
           Allegheny accepted coal from the substitute mine. Gatling
           invoiced Allegheny monthly for both sulfur and Btu
           adjustments in January, February, and March. Allegheny paid
           the sulfur adjustments but did not pay the Btu adjustments for
           those months. Allegheny paid the Btu invoices for April, May,
           June, and July but did not pay the Btu invoice for August.

           In late August, an Allegheny representative indicated in an
           email that it "stopped loading against [the Gatling] contract
           and will not resume until we have a resolution" regarding the
           Btu payments. (Aug. 24, 2012 email, 1.) Allegheny then
           recouped the Btu payments it paid to Gatling for the months of
           April, May, June, and July by withholding an equivalent
           amount from a subsequent undisputed invoice.

           On September 28, 2012, Gatling sent a letter to Allegheny
           regarding coal delivery and Btu adjustments. On October 10,
           2012, Allegheny sent a letter acknowledging that the source
           mine was no longer operating, but revoking its acceptance of
           substitute coal under the 2012 substitution agreement, and
           seeking written confirmation of Gatling's ability to deliver
           source mine coal.
No. 17AP-188                                                                   4

           On June 5, 2013, Gatling filed a complaint for breach of
           contract against Allegheny, which Allegheny answered on July
           23, 2013. With leave of the court, on December 24, 2014,
           Gatling filed its first amended complaint, again based on
           breach of contract and citing Allegheny's failure to accept
           certain coal, including carryover tons, Allegheny's attempt to
           terminate its consent to the 2012 substitution agreement and
           to not accept substitute coal, and Allegheny's failure to pay
           invoiced amounts for Btu adjustments in 2012. On January 5,
           2015, both parties filed motions for summary judgment. On
           January 7, 2015, Allegheny filed an amended answer and
           counterclaim, to which Gatling filed a motion to strike.

           The trial court granted Allegheny's motion for summary
           judgment and denied Gatling's motion for summary judgment
           on February 26, 2015. In doing so, the trial court found that the
           parties did not intend the base price referenced in the 2012
           substitution agreement to include Btu adjustments. The court
           first established the original 2008 coal sales agreement, its two
           amendments, and the two substitution agreements as "one
           unified document," which it found to be unambiguous. (Feb.
           26, 2015 Decision, 10.) The court then compared the language
           of the 2011 substitution agreement with the 2012 substitution
           agreement. The court determined that, because the 2011 notice
           included a specific statement that the base price would be
           subject to adjustment, the parties did not believe that the base
           price automatically included the adjustments listed in Section
           7.2 of the CSA. Thus, "[t]he specific inclusion of adjustments in
           the 2011 Substitution Agreement read in conjunction with their
           exclusion in the 2012 Substitution Agreement" shows the
           parties' intention that "the Base Price charged under the 2012
           Substitution Agreement would be the Base Price listed in
           section 7.1 of the CSA and nothing more." (Feb. 26, 2015
           Decision, 12.) Therefore, the court concluded that Allegheny
           was not required to pay the Btu premiums charged by Gatling
           in 2012.

           The trial court's conclusion in favor of Allegheny on the Btu
           adjustments was dispositive of several additional issues. The
           trial court determined that Allegheny acted reasonably and did
           not breach the CSA in withdrawing its consent to accept Alpha
           mine coal in 2012 because, in the trial court's opinion,
           comparing the language of the 2011 and 2012 substitution
           agreements showed Allegheny's acceptance of Alpha coal in
           2012 did not leave Allegheny commercially neutral. The trial
           court further determined that Allegheny was entitled to recoup
           the Btu payments it made by offsetting that amount against an
No. 17AP-188                                                                               5

              unrelated invoice under the netting provision, Section 7.7 of the
              CSA, which provides a means for the parties to aggregate and
              offset obligations that the parties are "required" to pay each
              other any amount in the same month. The trial court
              determined that Gatling was required to refund the
              overpayment because charging the Btu adjustments on coal
              delivered in 2012 was improper.

       {¶ 3} We reversed and remanded, holding that the trial court had erred in its
interpretation of the parties' agreements:
              The trial court, under the banner of both a unified agreement
              and a prior dealing of the parties, used the 2011 substitution
              agreement to contradict the 2012 substitution agreement and
              CSA terms. Under New York U.C.C. 2-202, use of the prior 2011
              substitution agreement to contradict the plain meaning of the
              2012 substitution agreement and CSA is impermissible. See
              also W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157, 163,
              566 N.E.2d 639, 565 N.Y.S.2d 440 (1990), quoting
              Intercontinental Planning v. Daystrom, Inc., 24 N.Y.2d 372,
              379, 248 N.E.2d 576, 300 N.Y.S.2d 817 (1969). "It is well settled
              that 'extrinsic and parol evidence is not admissible to create an
              ambiguity in a written agreement which is complete and clear
              and unambiguous upon its face.' ").

              Considering the above, we agree with Gatling that the trial
              court erred in considering the 2011 substitution agreement to
              contradict the terms of the 2012 substitution agreement and
              CSA to preclude Btu adjustments for 2012 substitute coal.
              Therefore, we remand the case to the trial court to consider the
              propriety of the 2012 Btu adjustments without contradictory
              impact from the 2011 substitution agreement and to consider
              whether factual issues remain regarding whether Allegheny
              was made commercial and operationally neutral as provided in
              Section 1.2 of the CSA, and whether Gatling supplied the
              alternative source coal in "strict accordance" with the 2012
              substitution agreement. (2012 Substitution Agreement, 2.)

Id. at ¶ 29-30.
       {¶ 4} After remand, Gatling filed a motion for partial summary judgment, which
the trial court overruled. (Sep. 29, 2016 Decision.) The trial court conducted a bench trial
from October 17 t0 26, 2016. On February 21, 2017, the trial court filed a decision in the
form of a final judgment entry with multiple findings of fact and rulings on Gatling's breach
of contract claims. (Feb. 21, 2017 Final Jgmt. Entry.)
No. 17AP-188                                                                                6

       {¶ 5} The trial court found that Gatling had "presented insufficient evidence" to
prove its claim that Allegheny had breached the Coal Sales Agreement ("CSA"). The trial
court stated that Gatling had the burden to show that Allegheny had remained
"commercially and operationally neutral" when accepting the substitute coal in order to
prove that Allegheny's refusal to accept the coal amounted to a breach of the CSA. (Final
Jgmt. Entry at 9.) The trial court interpreted the phrase "commercially and operationally
neutral" to mean that Allegheny could not "be placed in a worse position by the acceptance
of substitute coal then it would have been by the acceptance of Source Mine coal," and that
Allegheny "must be in the same position it would have been [in] had the CSA been
performed as originally intended." (Final Jgmt. Entry at 10.)
       {¶ 6} The trial court's analysis of the commercial and operational neutrality of the
transactions began with a comparison of the parties' performances under the 2011
Substitution Agreement and the 2012 Substitution Agreement. Before its amendment by
those agreements, the CSA had originally specified that in 2011, Gatling was to supply one
million tons of coal containing 12,000 Btu per pound, resulting in a Btu value of 24 trillion.
Under the 2011 Substitution Agreement, the parties agreed that Gatling would supply coal
from the Alpha Mine instead of the coal from the Source Mine. Because the Alpha Mine
coal had 13,000 Btu per ton, Allegheny would be required to accept 720 billion more Btu
than under the CSA. The trial court noted that this would have violated the requirement
that any substitution be commercially and operationally neutral, but for the parties'
decision to include a "waiver" in the 2011 Substitution Agreement of the surcharge for
higher Btu coal required by Section 7.2 of the CSA. Thus, Allegheny remained commercially
and operationally neutral by Gatling's provision of substitute coal under the 2011
Substitution Agreement. (Final Jgmt. Entry at 11-12.)
       {¶ 7} In contrast, the 2012 Substitution Agreement did not contain any language
that waived the Section 7.2 requirement to calculate a higher price for coal shipments with
elevated Btu levels. The trial court found that Gatling had shipped Allegheny 440,000 tons
of coal in 2012 with a Btu value of 13,000. The trial court found that this was not
commercially and operationally neutral, reasoning as follows:
              Pursuant to the 2012 Substitution Agreement, Defendant was
              required to accept and pay for an additional 880,000,000,000
              Btu that it was not required to buy under the CSA, as amended.
No. 17AP-188                                                                                7

              Furthermore, the 2012 Substitution Agreement did not have
              the same concession found in the 2011 Substitution Agreement
              essentially waiving payment for these extra Btu. This clearly
              puts Defendant in a worse position than it would have been if
              the CSA had been performed as originally intended. Therefore,
              the 2012 Substitution Agreement did not render Defendant
              commercially neutral.

              The numbers are clear. Defendant was placed at a detriment
              pursuant to the terms of the 2012 Substitution Agreement. If
              fully performed, the 2012 Substitution Agreement would have
              required Defendant to buy 880,000,000,000 Btu in 2012 that
              it was not required to buy under the terms of the CSA, as
              amended. The Court cannot find that Defendant was left
              commercially neutral in relation to the 2012 Substitution
              Agreement. Since this is so, along with the lack of evidence
              presented by Plaintiff as to actual neutrality, the Court must
              rule in favor of Defendant and find that it did not breach the
              CSA by refusing to accept any further Alpha Mine coal in 2012.

(Final Jgmt. Entry at 13.)
       {¶ 8} In addition, the trial court also found that Gatling had failed to prove that it
suffered any damages from Allegheny's refusal to accept substitute coal in 2012. The ruling
on damages was two-pronged. First, the trial court found that there was "no evidence" that
Gatling was ever obligated to buy the substitute coal from the two entities involved in its
procurement, Alpha Coal Sales, LLC ("Alpha") and Foresight Coal Sales, LLC ("Foresight").
(Final Jgmt. Entry at 14.) The trial court noted that Gatling was a party only to the CSA, the
2011 Substitution Agreement, and the 2012 Substitution Agreement, but not the
January 27, 2012 agreement between Alpha and Foresight for 440,000 tons of coal. The
trial court emphasized the fact that the latter agreement nowhere identified Foresight as an
agent of Gatling, and observed that "[t]he only relationship that they have to each other is
common ownership at some corporate level." Id. The trial court rejected Gatling's assertion
that Foresight was its agent, even though "multiple witnesses" had so testified. (Final Jgmt.
Entry at 15.) According to the trial court, "stating this is not enough," and there was not "a
shred of documentary evidence to show that Foresight was [Gatling's] agent." Id.
       {¶ 9} Second, the trial court found that Gatling had never paid Foresight for the
coal that Allegheny had refused to accept, stating that there was "no evidence that Foresight
ever received any money from [Gatling] for the coal that [Allegheny] refused to accept, nor
No. 17AP-188                                                                                8

is there evidence that Foresight remitted payment" to Gatling after it had sold the coal from
Alpha to third parties. (Final Jgmt. Entry at 15.) The trial court described Gatling
"essentially as a pass through entity" that would funnel Allegheny's payments for coal to
Foresight. This conclusion was based on the testimony of Robert Keith Varney, a witness
for Gatling, and an examination of a number of Gatling's general ledger accounting entries.
(Final Jgmt. Entry at 16-18.) However, although Varney testified that Gatling had paid
Alpha for all the substitute coal delivered to Allegheny from 2011 to 2013, there were no
accounting entries after December 2012 to corroborate this assertion. Based on this
evidence, the trial court concluded that Gatling had never "paid anybody" or "was ever
responsible" for the coal that Allegheny refused, and, therefore, "no evidence" that Gatling
had "actually sustained damages" arising from Allegheny's refusal to accept the coal in
2012. (Final Jgmt. Entry at 18-19.)
       {¶ 10} Finally, the trial court ruled that Gatling was entitled to $1,644,848.94 in
damages for coal that Allegheny had accepted but refused to pay. Thus, the trial court
entered partial judgment in favor of Gatling for that amount, plus interest at the statutory
rate, but entered judgment in favor of Allegheny on Gatling's breach of contract claim
arising from Allegheny's refusal to accept substitute coal in 2012. (Final Jgmt. Entry at 21-
22.)
       {¶ 11} The parties have both appealed. After setting forth the appropriate standard
of review, our analysis will begin with Gatling's appeal before turning to Allegheny's cross-
appeal.
II. STANDARD OF REVIEW
       {¶ 12} A manifest weight of the evidence standard applies to appellate review of a
judgment entered after a bench trial. App.R. 12(C). Under this standard, a reviewing court
must be "guided by a presumption that the findings of the trier-of-fact were indeed correct."
Seasons Coal Co. v. Cleveland, 10 Ohio St. 3d 77, 80 (1984). " 'Judgments supported by
some competent, credible evidence going to all the essential elements of the case will not
be reversed by a reviewing court as being against the manifest weight of the evidence.' " Id.,
quoting C.E. Morris Co. v. Foley Constr. Co., 54 Ohio St. 2d 279, 280 (1978). However, a de
novo standard of review applies to matters of law, including the interpretation and
construction of written contracts. Long Beach Assn. v. Jones, 82 Ohio St. 3d 574, 576
No. 17AP-188                                                                                9

(1998). Under the de novo standard, the court of appeals gives no deference to a trial court's
interpretation of legal issues. See, e.g., Holt v. State, 10th Dist. No. 10AP-214, 2010-Ohio-
6529, ¶ 9.
       {¶ 13} As noted in Gatling I, the parties agreed in a choice of law provision in the
CSA that New York law would govern any dispute arising out of the agreement. Gatling I at
¶ 22; CSA Section 11.
III. GATLING'S APPEAL
       {¶ 14} Gatling asserts the following assignments of error:
              1. The trial court erred in holding that Allegheny was permitted
              to renege on the Contract.

              2. The trial court erred by disregarding Allegheny's anticipatory
              repudiations of the Contract.

              3. Because the trial court based its findings that Allegheny was
              not commercially and operationally neutral under the 2012
              Substitution Agreement using a factor (high Btu) that was
              present when the consent was signed, the holding is an error.

              4. The trial court erred by using a theory of lack of
              consideration for the Contract as "support for the [c]ourt's
              decision" despite the fact that it is the law of the case that the
              contract is valid, and the trial court ultimately "resolve[d] this
              issue [in] favor of Plaintiff."

              5. The trial court erred by failing to apply Contract Section 7.5.

              6. The trial court erred by failing to apply Contract Section 16.0.

              7. The trial court erred by holding that Plaintiff bore the burden
              of proof on Allegheny's commercial and operational neutrality
              defense.

              8. The trial court erred in holding that Gatling did not suffer
              damages due to Allegheny's refusal to accept the last 150,466
              tons of coal under the Contract.

              9. The trial court erred in holding that a written agreement was
              required to establish an agency relationship between Gatling
              and Foresight Coal Sales.

              10. The trial court erred by failing to award Gatling damages for
              the coal Allegheny refused to accept.
No. 17AP-188                                                                               10

              11. The trial court erred by failing to award Gatling interest at
              the contractually-agreed rate.

              12. The trial court erred by finding that Allegheny was not
              commercially and operationally neutral under the 2012
              Substitution Agreement.

              13. The trial court erred by finding that Foresight Coal Sales
              was not Gatling's agent.

       {¶ 15} Gatling describes the first eleven of the foregoing statements as "Legal Errors
Subject to De Novo Review" and the last two statements as "Factual Errors Contrary to the
Manifest Weight of the Evidence." The appropriate standards of review will be addressed
in the analysis, which will also address the assignments of error out of order and in
groupings that more accurately correspond to the specific rulings of the trial court
challenged by this appeal.
       A. Gatling's First Assignment of Error
       {¶ 16} In Gatling's first assignment of error, it asserts that the trial court erred by
"holding that Allegheny was permitted to renege" on the CSA. However, there is no
discussion of a determination by the trial court that Allegheny could "renege" on the CSA
in Gatling's brief. Under App.R. 16(A)(7), a party's brief must contain "[a]n argument
containing the contentions of the appellant with respect to each assignment of error
presented for review and the reasons in support of the contentions, with citations to the
authorities, statutes and parts of the record on which appellant relies." Without an
argument supporting the assignment of error, Gatling fails to provide the necessary
grounds for its consideration under App.R. 16(A)(7).
       {¶ 17} In addition, the trial court's decision is devoid of any determination that
Allegheny was "permitted to renege" on the parties' agreement. Insofar as Gatling intends
for the word "renege" to describe a breach or anticipatory repudiation of the CSA, this
assignment of error is duplicative of others presented. Accordingly, the first assignment of
error is overruled.
       B. Gatling's Fourth Assignment of Error
       {¶ 18} The fourth assignment of error asserts that the trial court erred by applying
"a theory of lack of consideration" to the parties' agreement, where, under the law of the
No. 17AP-188                                                                                 11

case, the CSA was a valid contract and, in fact, the issue of its validity was resolved in
Gatling's favor.
       {¶ 19} In a discussion prefacing the main section of its analysis, the trial court found
that because Gatling did "not own any mine located in New Haven, West Virginia," as stated
in the CSA, the agreement was "essentially a contract for the sale of coal that [Gatling] does
not own, control, or have the right to sell." (Final Jgmt. Entry at 8.) Although the trial court
considered this to be "a lack of consideration" that "render[ed] the contract unenforceable,"
it nevertheless stated that the lack of consideration was "a mere technicality" and concluded
that the contract should be enforced. Id.
       {¶ 20} We agree that the trial court did engage in an erroneous and unnecessary
analysis of the validity of the CSA when it determined that the agreement lacked
consideration because it misidentified the location of Gatling's coal mine. "Absent fraud or
unconscionability, the adequacy of consideration is not a proper subject for judicial
scrutiny." Apfel v. Prudential-Bache Secs., Inc., 81 N.Y.2d 470, 476 (1993). Even an
exchange that is "grossly unequal or of dubious value" may constitute valid consideration.
Id. Here, as Gatling points out, there was ample consideration for the agreement between
the parties, as Gatling had provided coal to Allegheny in exchange for $126 million between
2008 and 2012. Furthermore, even if, as the trial court asserted, the misidentified coal
mine in the agreement was somehow indicative that Gatling lacked title to the coal it sold,
"[t]he fact that the sellers may not have had a property right in what they sold does not, by
itself, render the contract void for lack of consideration." Id.
       {¶ 21} Nevertheless, it is not clear what motivates Gatling to assert this assignment
of error. The trial court ultimately found that the CSA was a valid, enforceable agreement.
The validity of the CSA is the premise behind any claim for a breach of that agreement.
Thus, the trial court's ruling did not prejudice Gatling in any way and, in fact, worked to its
benefit. Without the presumption of the agreement's validity, Gatling would have been
unable to prosecute its breach of contract claims. At most, the trial court's discussion of the
validity of the CSA amounted to harmless error. Under Civ.R. 61, "any error or defect in the
proceeding which does not affect the substantial rights of the parties" must be disregarded.
"A reviewing court will not disturb a judgment unless the error contained within is
materially prejudicial to the complaining party." Alternatives Unlimited-Special, Inc. v.
No. 17AP-188                                                                             12

Ohio Dept. of Edn., 10th Dist. No. 12AP-647, 2013-Ohio-3890, ¶ 39, citing Guertin v.
Guertin, 10th Dist. No. 06AP-1101, 2007-Ohio-2008, ¶ 13. Because the trial court's
erroneous analysis of consideration and ultimate finding that the CSA was a valid
agreement did not prejudice Gatling in any way, the fourth assignment of error is overruled.
       C. Gatling's Third and Twelfth Assignments of Error
       {¶ 22} Assignments of error three and twelve challenge the trial court's ruling that
Gatling could not prove its breach of contract claim premised on Allegheny's refusal to
accept further substitute coal.
       {¶ 23} We begin with the third assignment of error, which states: "Because the trial
court based its findings that Allegheny was not commercially and operationally neutral
under the 2012 Substitution Agreement using a factor (high Btu) that was present when the
consent was signed, the holding is an error." Gatling argues that under Section 1.2 of the
CSA, the provision that authorized the provision of substitute coal, Allegheny was required
to assess the commercial and operational neutrality of any substitute coal before agreeing
to the substitution. According to Gatling, because Allegheny made no such assessment and
failed to insist on any new terms in the 2012 Substitution Agreement that would guarantee
commercial and operational neutrality, it breached the CSA when it eventually refused to
accept the substitute coal. (Appellant's Brief at 15-17.)
       {¶ 24} Gatling's argument essentially posits an interpretation of the CSA that the
trial court did not apply. The relevant portion of Section 1.2 of the CSA states:
              Seller may in its discretion, but without obligation, with the
              prior written approval of Buyer, which approval shall not be
              unreasonably withheld, furnish all or any part of the coal to be
              supplied hereunder from other source(s), on the same terms
              and conditions set forth in this Agreement, and at the same
              Base Price to Buyer as coal supplied from the Source Mine,
              provided Buyer is (or is made by payment or adjustment of the
              Base Price) commercially and operationally neutral to
              receiving and burning coal from such substitute source rather
              than from the Source Mine.

       {¶ 25} There is no support for Gatling's contention that the language of Section 1.2
requires the Buyer to conduct a commercial and operational neutrality assessment of the
substitute coal before agreeing to the substitution. The only express temporal requirement
in Section 1.2 states that Buyer must provide "prior written approval" before Seller may
No. 17AP-188                                                                                 13

"furnish" the substitute coal. There is no requirement that the question of commercial and
operational neutrality be decided before Buyer may approve Seller's request.
       {¶ 26} In fact, the overall structure of the parties' agreement indicates that it would
be impossible for any definitive determination of neutrality to occur before performance,
and that such determination must be made on an ongoing basis. Section 4.2 provides for
an independent laboratory analysis of coal shipments, the results of which "shall be used to
determine quality adjustments and any rejection or suspension rights." Section 4.3 states
that the "total moisture, ash, heating value, sulfur, and volatile matter" of the coal are to be
analyzed. Section 7.2 requires a monthly determination of whether "[t]ypical Btu and Sulfur
specifications" are met, based on "the data obtained in accordance" with the independent
analysis required by Section 4. Based on variations in the data, the Base Price of the coal is
adjusted accordingly to a formula that provides "[c]ompensation to either Buyer or Seller
for variations in Btu or Sulfur." These provisions indicate the parties' intent to determine
the coal's quality through a regular, periodic analysis, which formed the basis for a monthly
recalculation of its price. Because these regular price adjustments would be a variable
factoring into the assessment of the commercial and operational neutrality of any substitute
coal, it would be untenable for Section 1.2 to require the Buyer to perform a blanket
assessment of commercial and operational neutrality before agreeing to accept any
substitute coal.
       {¶ 27} Section 1.2 also states that Buyer may be made commercially and
operationally neutral "by payment or adjustment of the Base Price" of the substitute coal.
As discussed, such payment or price adjustment depends on monthly sampling of the coal,
the results of which determine the price for each shipment. Thus, a monthly assessment of
the commercial and operational neutrality of the substitute coal may occur and be resolved
by a price adjustment. In addition, the 2012 Substitution Agreement expressly required
that any substitute coal must be provided "on the same terms and conditions set forth in"
the CSA. This presumably includes the provisions just referenced. For the foregoing
reasons, we reject Gatling's assertion that Section 1.2 of the CSA required Allegheny to
perform a definitive, binding assessment of the commercial and operational neutrality of
any substitute coal prior to agreeing to the substitution. Accordingly, the third assignment
of error is overruled.
No. 17AP-188                                                                               14

       {¶ 28} The twelfth assignment of error states that "[t]he trial court erred by finding
that Allegheny was not commercially and operationally neutral under the 2012 Substitution
Agreement." Gatling points out that the CSA did not set any limit on the Btu in coal to be
provided because high Btu coal is "more desirable" and a "better product," due to its ability
to provide more heat at reduced quantities that are cheaper to transport. (Appellant's Brief
at 35.) Thus, Gatling believes that the substitute coal actually benefitted Allegheny, and it
was therefore error for the trial court to conclude that the higher-priced substitute coal was
not operationally and commercially neutral. According to Gatling, this conclusion was
against the manifest weight of the evidence because its expert witness, Walt Coleman,
testified that that the substitute coal saved Allegheny money in "sulfur adjustments and
operational costs," as well as in transportation costs. (Appellant's Brief at 36-38.)
       {¶ 29} Gatling describes the twelfth assignment of error as a "factual error" subject
to appellate review under a manifest weight of the evidence standard. (Appellant's Brief at
ii & 39.) However, the trial court's interpretation of the CSA, which guided its factual
determination, is reviewed under a de novo standard. Long Beach Assn. Although we agree
with the trial court's ultimate determination that the substitute coal Gatling sought to
provide did not render Allegheny commercially and operationally neutral, because we
disagree with the trial court's interpretation of the CSA, we must begin with a discussion of
that agreement.
       {¶ 30} As previously noted, the trial court interpreted the phrase "commercially and
operationally neutral" in Section 1.2 of the CSA to mean that Allegheny could not "be placed
in a worse position by the acceptance of substitute coal then it would have been by the
acceptance of the Source Mine coal." (Final Jgmt. Entry at 10.) The trial court also stated
that commercial and operational neutrality required Allegheny to be placed "in the same
position it would have been [in] had the CSA been performed as originally intended" after
accepting substitute coal. Id. Thus, the trial court equated commercial and operational
neutrality with Allegheny's expectations for Gatling's performance under the CSA. See, e.g.,
Emposimato v. CIFC Acquisition Corp., 30 Misc.3d 1233(A), 926 N.Y.S.2d 344, ¶ 12
(Sup.Ct.) (explaining that expectancy damages "are intended to place the party in as good
a position as if the contract had been performed"); Tullett Prebon Fin. Servs. v. BGC Fin.,
L.P., 111 A.D.3d 480, 481, 975 N.Y.S.2d 18, ¶ 2, quoting Wenger v. Alidad, 265 A.D.2d 322,
No. 17AP-188                                                                                             15

323, 696 N.Y.S.2d 227 (1999) (explaining that " 'breach of contract damages are intended
to place a party in the same position as he or she would have been in if the contract had not
been breached' ").
        {¶ 31} The trial court made the following assessment of the parties' expectations.
Under the 2012 Substitution Agreement, the parties agreed that Gatling would "deliver
between 400,000 and 500,000 tons" of the substitute coal. (2012 Substitution Agreement.)
Because this coal had 13,000 Btu/lb. and the coal described in the CSA was rated at 12,000
Btu/lb., the trial court determined that "[p]ursuant to the 2012 Substitution Agreement,
Defendant was required to accept and pay for an additional 880,000,000,000 that it was
not required to buy under the CSA, as amended." (Final Jgmt. Entry at 13.) Because
Allegheny had to pay for this price differential, the trial court concluded that it was "in a
worse position than it would have been if the CSA had been performed as originally
intended. Therefore, the 2012 Substitution Agreement did not render Defendant
commercially neutral." Id.
        {¶ 32} The trial court's statements indicate that it understood "commercially and
operationally neutral" to prohibit the provision of any substitute coal with an elevated Btu
value. However, such a prohibition is inconsistent with the parties' expectations because it
fails to consider several key provisions in both the CSA and the 2012 Substitution
Agreement. The CSA expressly provides for the provision of coal with varying levels of Btu.
Section 3.0 lists the "Quality Specifications" for coal and provides that a "typical"
specification for "Heating Value (Btu/lb)" is "12,000 min." Thus, the parties contemplated
that coal with a 12,000 Btu rating was the general benchmark for a minimally acceptable
level of Btu.1 Section 4.3 requires regular testing of samples from shipments to determine
if the "heating value" specification is met. Thus, the parties entered into the CSA fully
expecting Btu levels in the coal to vary.
        {¶ 33} Crucially, varying Btu levels also affected the parties' expectations regarding
the price of the coal. Section 7.2 provides a mathematical formula for determining the
actual price of coal after taking into account "variations in Btu." First, a "Base Price" is
determined, based on the "Typical Btu" and other specifications. Then, "[u]sing the data

1Section 3.0 also gives Buyer a right to reject coal with a Btu level of less than 11,500/lb, one of several
"Shipment Reject Specifications."
No. 17AP-188                                                                                16

obtained" from the testing in Section 4, a formula for determining the "[c]ompensation to
either Buyer or Seller for variations in Btu" results in an "Adjusted Base Price." Read as a
whole, these provisions of the CSA indicate the parties' understanding that Btu levels of
coal would fluctuate and that the price paid for coal would adjust accordingly. All of these
provisions applied to substitute coal, as the 2012 Substitution Agreement expressly states
that the "CSA shall continue in full force and effect in accordance with its terms."
       {¶ 34} The foregoing observations are not a novel reading of the parties' agreements.
We discussed them all in Gatling I. We noted that "under the CSA, the default terms for
substitution of coal are the 'same terms and conditions' as those that apply to source mine
coal, including supplying the substitute coal at the 'same Base Price' as source mine coal,
subject to adjustments including those for Btu." Gatling I at ¶ 28. We also stated that "the
2012 substitution agreement, read in conjunction with the CSA it incorporates by reference,
plainly reflects the default substitution arrangement to provide coal from other sources
at the base price subject to adjustments." (Emphasis added.) Id. In short, the CSA provided
a comprehensive and flexible mechanism for adjusting the price of coal with Btu in excess
of 12,000/lb. that was incorporated into the 2012 Substitution Agreement. This reflected
the parties' expectation that any coal Gatling might provide, including substitute coal,
might surpass the 12,000/lb. Btu level. However, the trial court assumed that all coal
provided under the CSA would have a fixed value of 12,000/lb. Btu, which lead it to
consider any coal provided under the 2012 Substitution Agreement that surpassed that
level as a violation of the commercial and operational neutrality requirement. Because the
parties contracted for and expected such fluctuations, the trial court's assumption led to an
erroneous understanding of commercial and operational neutrality.
       {¶ 35} A more realistic and practical understanding of commercial and operational
neutrality must consider the price of the coal, including any adjustment under the CSA, as
well as market conditions at the time of its provision. In its briefing, Allegheny counters
Gatling's assertion that higher-level Btu is always desirable by stating that this "is not true
if the price of those additional Btus, which were not originally contracted for, is more than
those additional Btus could be purchased for on the open market." (Appellee's Brief at 28.)
Indeed, a Seller cannot charge the Adjusted Base Price for coal with high Btu levels if that
price exceeds the fair market value for that coal and comply with the Section 1.2
No. 17AP-188                                                                                17

requirement that the substitute coal render the Buyer commercially and operationally
neutral. The provision allows Seller to provide substitute coal "provided Buyer is (or is made
by payment or adjustment of the Base Price) commercially and operationally neutral to
receiving and burning coal from such substitute source rather than from the Source Mine."
(CSA Sec. 1.2.) If the fair market value for coal with the Btu level of the substitute coal
exceeds the price calculated according to the formula in the CSA, the transaction can only
be commercially neutral to the Buyer if there is "payment or adjustment of the Base Price"
to conform to the fair market value. Otherwise, the Buyer is paying a premium to the Seller
for coal it could otherwise obtain on the open market at a lower cost.
       {¶ 36} With this understanding of commercial and operational neutrality in mind,
we turn to the evidence presented by the parties. Gatling points to several points made
during the testimony of Walt Coleman, its "expert on commercial and operational
neutrality." (Appellant's Brief at 37.) Mr. Coleman testified that the high Btu-level coal
saved Allegheny $1.21 per ton in transportation costs, in addition to "the value of the higher
Btus" resulting from the increased energy efficiency of the coal. (Appellant's Brief at 37;
Oct. 19, 2016 Tr. at 475.) Mr. Coleman also stated that there were savings resulting from
sulfur adjustments and disposal costs. (Oct. 19, 2016 Tr. at 491.)
       {¶ 37} Allegheny points to the testimony of Michael Delmar, an accountant who
previously worked for Allegheny as an economist and buyer in its fuels group. Mr. Delmar
testified that Gatling's claimed price under the CSA for the substitute coal resulted in an
additional charge of $2.796 million, based on 439,000 tons of coal with an average Btu per
pound of 13,030. (Oct. 25-26, 2016 Tr. Vol. V at 911.) Mr. Delmar also testified that
Allegheny could have purchased the same amount of coal with additional Btus on the open
market for approximately $1.7 million, over $1.2 million less than the price charged by
Gatling: "So, had Allegheny been able to go to the market for those extra Btus, it likely could
have saved over a million dollars in that coal purchase." (Tr. Vol. V at 913.)
       {¶ 38} Considering the testimony cited by each party, we do not believe that the trial
court erred in its ultimate finding that the substitute coal failed to render Allegheny
commercially and operationally neutral. Mr. Delmar's testimony provides concrete figures
to illustrate that Gatling's substitute coal, priced in accordance with the formula in the CSA,
resulted in a $1.2 million charge that Allegheny could have avoided by purchasing the coal
No. 17AP-188                                                                                 18

on the open market. Providing substitute coal to Allegheny at that price would not render
it commercially and operationally neutral.
       {¶ 39} Other than the $1.21 per ton in transportation costs, Gatling does not point
to any specific dollar amount to quantify the cost savings described by Mr. Coleman. Even
if Gatling's substitute coal would have saved Allegheny $1.21 per ton in transportation costs,
the resulting savings for 439,000 tons of coal would have been only $531,190. This would
not have left Allegheny commercially and operationally neutral because its savings on the
open market would have been over twice that amount.
       {¶ 40} Based on the foregoing, we conclude that the manifest weight of the evidence
in the record supported the trial court's ultimate conclusion that the substitute coal
provided by Gatling did not comply with the CSA's requirement of commercial and
operational neutrality. Accordingly, Gatling's twelfth assignment of error is overruled.
       D. Gatling's Second, Fifth and Sixth Assignments of Error
       {¶ 41} Gatling's second assignment of error states: "The trial court erred by
disregarding Allegheny's anticipatory repudiations of the contract." Gatling argues that
Allegheny's decision to refuse substitute coal and credit itself for previously paid invoices
for substitute coal amounted to "unjustified anticipatory repudiations" of the parties'
agreements. (Appellant's Brief at 18.) The fifth and sixth assignments of error assert that
the trial court erred by failing to apply Section 7.5 and Section 16.0 of the CSA, which
required Allegheny to continue to pay and demonstrate its ability to accept delivery of coal,
regardless of any dispute between the parties. (Appellant's Brief at 27.)
       {¶ 42} Under the doctrine of anticipatory repudiation, "if one party to a contract
repudiates his duties thereunder prior to the time designated for performance and before
he has received all of the consideration due him thereunder, such repudiation entitles the
nonrepudiating party to claim damages for total breach." Long Island R.R. Co. v. Northville
Industries Corp., 41 N.Y.2d 455, 463, 393 N.Y.S.2d 925 (1977).
       {¶ 43} Gatling asserts that Allegheny anticipatorily repudiated the CSA when it sent
a letter on October 10, 2012, stating that it would not accept any more substitute coal in lieu
of coal from the original source or pay Gatling's invoices for the higher Btu coal. (Appellant's
Brief at 28.) According to Gatling, these statements amounted to anticipatory repudiation
because they were based on "an untenable interpretation of the contract" and expressed an
No. 17AP-188                                                                               19

"intent to perform only upon the satisfaction of extracontractual conditions," definitions
set forth in Fonda v. First Pioneer Farm Credit, ACA, 86 A.D.3d 693, 694-95, 927 N.Y.S.2d
417 (2011), ¶ 2.
       {¶ 44} As our previous discussion illustrates, it was Gatling's interpretation of the
CSA that was untenable, not Allegheny's. Gatling's attempt to provide substitute coal at a
price higher than the coal would have cost Allegheny on the open market violated the
agreement's commercial and operational neutrality requirement. This breach preceded
Allegheny's communication, which was a request for Gatling to perform in a manner that
would have complied with the CSA's neutrality provision. As such, it was not an anticipatory
breach of performance by Allegheny.
       {¶ 45} Although the trial court did not discuss either Section 7.5 or Section 16.0 of
the CSA in its decision, Gatling was not prejudiced by this failure. Section 7.5 states:
              Any dispute as to the amount of any invoice shall not permit
              any delay in or deduction from the payment of that, or of any
              other invoice(s); provided, however, that if it is later
              determined that any portion of any payment represents
              overpayment or is otherwise not due to seller, then Seller shall
              promptly refund to Buyer the amount of such overpayment
              plain interest thereon, calculated from the date of such
              overpayment to the date of repayment, at two percent above
              the rate of interest last publicly announced by Citibank, N.A.,
              as its prime rate as of the date of such overpayment.

       {¶ 46} Gatling advances a colorable argument that Allegheny breached the foregoing
provision by withholding payment in the amount of $1,644,848.94, rather than paying at
the time of dispute (Appellant's Brief at 27.) However, the trial court did award Gatling
partial summary judgment in this amount, plus interest, which is the remedy for non-
payment specified in the above provision. Thus, the trial court's failure to consider this
provision amounts to harmless error.
       {¶ 47} Nor did the trial court's failure to apply Section 16.0 prejudice Gatling.
Section 16.0 of the CSA states:
              At either party's request, the other party shall continue to
              demonstrate throughout the Term the availability of, its ability
              to deliver, or its ability to accept delivery of, coal of the quantity
              and quality required hereunder. Time is of the essence of this
              Agreement with respect to the delivery and acceptance of
              delivery of all mutually agreed upon deliveries.
No. 17AP-188                                                                                  20

       {¶ 48} Gatling argues that Allegheny's refusal to accept any further substitute coal
in its October 10, 2012 letter breached the Section 16.0 requirement to demonstrate "its
ability to accept delivery" of coal. (Appellant's Brief at 28.) In the letter, Allegheny stated
that "the Btu premium" was a "violation of the commercial neutrality clause" of the CSA,
that it would "not accept any further deliveries of substitute coal." Allegheny also stated:
"Buyer will accept deliveries of Source Mine coal upon receipt of Seller's written
confirmation of its ability to deliver Source Mine coal. Once Seller confirms its ability to
deliver Source Mine coal, Buyer will submit an appropriate delivery schedule to Seller
which will meet the 2012 minimum tonnage requirement." (Emphasis added.) In so stating,
Allegheny complied with the Section 16.0 requirement to demonstrate its "ability to accept
delivery of, coal of the quantity and quality required" under the CSA because Allegheny was
only required to accept substitute coal that rendered it commercially and operationally
neutral. Thus, Allegheny did not breach Section 16.0 by refusing to accept delivery of coal
that did not conform to the requirements of Section 1.2 of the CSA. Even though the trial
court did not apply Section 16.0, Gatling would not have proven that Allegheny failed to
comply with it. At most, the trial court's failure to consider either Section 7.5 or Section 16.0
of the CSA amounted to harmless error. For the foregoing reasons, Gatling's second, fifth,
and sixth assignments of error are overruled.
       E. Gatling's Seventh Assignment of Error
       {¶ 49} Gatling's seventh assignment of error states: "The trial court erred by holding
that Plaintiff bore the burden of proof on Allegheny's commercial and operational
neutrality defense." Gatling claims that the trial court made a legal error when it placed the
burden on it to prove commercial and operational neutrality as an element of its breach of
contract claim arising from Allegheny's refusal to accept the substitute coal. Instead,
Gatling argues, Allegheny should have had the burden of proof on the issue because it "pled
the alleged lack of neutrality as an affirmative defense in its Answer." (Appellant's Brief at
31.)
       {¶ 50} Although the parties agreed in Section 11 of the CSA that New York
substantive law would govern any dispute between them, the burden of proof raises a
procedural question that Ohio law must resolve. Young v. Frank's Nursery & Crafts, Inc.,
58 Ohio St. 3d 242, 243 (1991), fn. 1, citing Pennsylvania v. McCann, 54 Ohio St. 10 (1896)
No. 17AP-188                                                                                 21

(holding that the "burden of proof is governed by Ohio law" although another state's
substantive law applies to the dispute); see also White v. Crown Equip. Corp., 160 Ohio
App.3d 503, 2005-Ohio-1785, ¶ 13 (3d Dist.) (stating that "choice of law provisions apply
to determine the application of state substantive law; therefore, while a forum may apply
the substantive law of another state, the forum's own procedural law will govern the case").
       {¶ 51} There is a well-established "general rule" that, "in civil actions, the obligation
of making out a case for relief or remedy by process of court is upon the plaintiff, the mover,
the initiator of the action or proceeding. And, speaking generally, the burden of making the
necessary proof to warrant the order, finding, or judgment of the court, is upon the party
praying for the relief or the remedy." Martin v. Columbus, 101 Ohio St. 1, 5 (1920). A more
specific rule applicable to pleadings in contract actions states the following:
              Where, in an action upon a contract, it is necessary for the
              plaintiff to establish the performance of the stipulations on his
              part in order to recover, the burden of proof is on him, and the
              burden is not changed by the fact, that the answer, in addition
              to a denial of performance by the plaintiff, specifically
              enumerates several particulars in which such failure to perform
              consists.

O. F. Mehurin & Son v. Stone, 37 Ohio St. 49, 54 (1881).
       {¶ 52} In a more detailed holding, the Supreme Court of Ohio similarly held:
              When by way of answer to such a petition the defendant in
              addition to pleading the general denial, further alleges that the
              services performed by the plaintiff were rendered and
              performed by him under an express contract the terms of which
              preclude the recovery of compensation therefor, such
              averments do not constitute an affirmative defense of new
              matter requiring a reply, and the filing of a reply thereto does
              not operate to change or enlarge the issues, or to shift the
              burden of proof. The legal effect of such an answer taken as a
              whole, is merely to deny the cause of action asserted by plaintiff
              in his petition, and the burden of proof upon the issues thus
              joined rests with the plaintiff, and the court of common pleas
              did not err in so instructing the jury in the present case.

Dykeman v. Johnson, 83 Ohio St. 126, 132 (1910), paragraph two of the syllabus.
       {¶ 53} As these holdings illustrate, the form of Allegheny's answer did not alter
Gatling's burden of proof. The fact that Allegheny's answer specifically pointed to Gatling's
failure to perform in accordance with the CSA's commercial and operational neutrality
No. 17AP-188                                                                                     22

requirement did not relieve Gatling of its burden to prove neutrality as part of its breach of
contract claim alleging that Allegheny unjustifiably failed to accept the substitute coal. It
would be an act of gamesmanship to shift the plaintiff's burden of proof to the defendant
simply because a responsive pleading invoked the language of the contract to defend
against a claim of breach. Gatling's seventh assignment of error is without merit, and is
accordingly overruled.
       F. Gatling's Eleventh Assignment of Error
       {¶ 54} In its eleventh assignment of error, Gatling argues that the trial court erred
by failing to award it interest based on the rate agreed to by the parties in Section 7.6 of the
CSA. The trial court's ruling stated: "The Court hereby awards partial judgment in Plaintiff's
favor in the amount of $1,644,848.94, plus interest at the statutory rate from the date of
the filing of this case, plus interest at the statutory rate thereafter." (Final Jgmt. Entry at
22.)
       {¶ 55} Under either New York or Ohio law, the statutory rate of prejudgment
interest only applies in a breach of contract action in the absence of a contractual provision
stating an agreed rate by the parties. R.C. 1343.03(A) (stating that a prevailing party is
entitled to interest on damages at the rate set forth in R.C. 5703.47, "unless a written
contract provides a different rate of interest in relation to the money that becomes due and
payable, in which case the creditor is entitled to interest at the rate provided in that
contract"); NML Capital v. Republic of Argentina, 17 N.Y.3d 250, 258, 928 N.Y.S.2d 666,
(June 30, 2011) (stating that "[i]f the parties failed to include a provision in the contract
addressing the interest rate that governs after principal is due or in the event of a breach,
New York's statutory rate will be applied as the default rate").
       {¶ 56} Here, in Section 7.6 of the CSA, the parties agreed that any "delinquent
amount" on an invoice "shall bear interest, from such due date until the date such
delinquent amount is paid, at two percent above the rate of interest last publicly announced
by Citibank, N.A. as its prime rate as of such due date." Because this provision demonstrates
the parties' intent to pay a different rate of interest than the statutory rate, Gatling is entitled
to that rate. The trial court erred by disregarding this provision of the CSA. See, e.g., Ronald
J. Solomon, D.D.S., Inc. v. Davisson, 1st Dist. No. C-170403, 2018-Ohio-2011 (reversing a
trial court ruling declining to award interest at the rate agreed to in the parties' contract).
No. 17AP-188                                                                               23

       {¶ 57} Allegheny's only response is that Gatling is not entitled to interest because it
"is not entitled to any damages. Therefore, it is not entitled to any interest." (Brief of
Appellee in Response at 46.) However, Gatling is entitled to damages. As explained below
in the discussion of Allegheny's cross-appeal, the trial court did not err in awarding partial
judgment in Gatling's favor in the amount of $1,644,848.94. It did, however, err by not
awarding Gatling interest at the rate specified in Section 7.6 of the CSA. Accordingly, the
eleventh assignment of error is sustained.
       G. Gatling's Eighth, Ninth, Tenth and Thirteenth Assignments of Error
       {¶ 58} Gatling's remaining assignments of error concern the trial court's failure to
award it damages for Allegheny's refusal to accept the substitute coal and the trial court's
finding that no agency relationship existed between Gatling and Foresight. Our resolution
of the foregoing assignments of error moots these issues. Because we agree with the trial
court that Gatling did not prove its breach of contract claim requiring it to show that the
substitute coal rendered Allegheny commercially and operationally neutral, Gatling was not
entitled to damages on that claim. The trial court's finding of a lack of an agency
relationship between Gatling and Foresight was an alternative basis for ruling that Gatling
was not entitled to damages. Even if this ruling were reversed, it would not resuscitate
Gatling's claim of breach arising out of Allegheny's refusal to accept additional shipments
of substitute coal. Accordingly, assignments of error eight, nine, ten and thirteen are
rendered moot.
IV. ALLEGHENY'S CROSS-APPEAL
       {¶ 59} Allegheny has filed a cross appeal challenging the trial court's partial
judgment in favor of Gatling that awarded damages in the amount of $1,644,848.94.
Allegheny asserts the following assignment of error:
              The trial court committed an error of law by awarding damages
              to plaintiff despite finding that the plaintiff failed to prove the
              elements necessary to establish its breach of contract claim.

       {¶ 60} Allegheny argues that the trial court erred as a matter of law by awarding
damages after determining that Gatling had failed to prove breach, a necessary element of
any breach of contract claim. (Cross-Appeal Brief at 25-26.) Allegheny makes two main
points to support its argument. First, Allegheny points to the trial court's conclusion that
Gatling could not prove breach because it failed to prove that the substitute coal rendered
No. 17AP-188                                                                                24

Allegheny commercially and operationally neutral. (Cross-Appeal Brief at 26-30.) Second,
Allegheny argues it was error to award damages because Gatling failed to perform "in strict
accordance" with the parties' agreements. (Cross-Appeal Brief at 31-41.) According to
Allegheny, Gatling "materially breached the Agreements in at least five ways." (Cross-
Appeal Brief at 32.) Gatling's alleged breaches consisted of violating the commercial and
operational neutrality requirement; failing to possess title to the coal delivered to
Allegheny; attempting to assign its obligations without obtaining Allegheny's written
consent; failing to deliver coal after Allegheny withdrew its consent to substitution; and
failing to provide adequate assurances of its performance. Id.
       {¶ 61} There are four "essential elements of a cause of action to recover damages for
breach of contract, to wit: the existence of a contract, the plaintiff's performance under the
contract,   the   defendant's   breach    of   that   contract,   and   resulting   damages."
JP Morgan Chase v. J.H. Elec. of New York, Inc., 69 A.D.3d 802, 893 N.Y.S.2d 237 (2010),
¶ 2. "Damages without such breach cannot be compensated at law." Godfrey v. Newman,
135 Misc. 764, 239 N.Y.S. 585, 588 (N.Y.Mun.Ct. 1930) (holding that a plaintiff who
"suffered damage" after defendant stockbrokers sold securities from his margin account at
a loss "in a wildly fluctuating market" was not entitled to compensation, as there was no
breach of contract where the parties' agreement authorized the sale of the securities upon
a specified decrease in their market value).
       {¶ 62} While we agree with Allegheny's assertion that it would be an error of law for
a court to award damages without a plaintiff proving breach, we cannot agree that the trial
court committed this error. Gatling stated two causes of action for breach of contract in its
complaint. Count I was based on a "Failure to Accept Coal" and Count II was based on a
"Failure to Pay Invoices." (Compl. at ¶ 34-50.) The trial court's ruling that Gatling failed to
prove breach because it could not prove that the substitute coal rendered Allegheny
commercially and operationally neutral applied to Count I, the claim alleging that
Allegheny's failure to continue to accept the substitute coal amounted to a breach of
contract. However, the trial court expressly stated that the entry of partial judgment and
damages was based on Gatling's "claim for charges associated with Btu supplied to
Defendant in 2012 and not paid for," which describes Count II. (Emphasis added.) (Final
Jgmt. Entry at 22.) The distinction between the two theories of breach is also evident in the
No. 17AP-188                                                                                              25

trial court's ruling that although Allegheny "was justified in refusing to accept any further
Alpha Mine coal, [it] is still required to pay for Btu actually supplied in 2012." Id. Thus, the
trial court's ruling concerning Gatling's failure to prove operational and commercial
neutrality is not applicable to the claim for breach of contract arising from the failure to pay
for coal that Allegheny actually accepted.
        {¶ 63} The same point may be made with regard to the question of whether Gatling
performed in "strict accordance" with the parties' agreements. It is true, as Allegheny points
out, that we remanded this case to the trial court to determine "whether Gatling supplied
the alternative source coal in 'strict accordance' with the 2012 Substitution Agreement."
Gatling I at ¶ 30. The phrase "strict accordance" quoted the parties' own language that
concluded the 2012 Substitution Agreement: "Allegheny hereby consents to Gatling
providing the Alternative Source Coal provided the same is supplied in strict accordance
with the above notice." (2012 Substitution Agreement at 2.) The phrase "above notice"
referred to the 2012 Substitution Agreement and its new terms concerning the tonnage of
coal, its source mine, and place of delivery.
        {¶ 64} The "material breaches" that Allegheny identifies are an unjustifiable
extension of the scope of our mandate, which was not a license for Allegheny to pursue
counterclaims for breaches of any provision of the CSA referenced by the trial court that it
never plead at the outset of this litigation. However, that is effectively what Allegheny is
now attempting. Furthermore, not one of the points raised by Allegheny addresses the
breach identified by the trial court as the basis for its award of damages: Allegheny's failure
to pay for coal that Gatling provided. Without any explanation of how the trial court erred
in determining that its failure to pay Gatling $1,644,848.94 amounted to a breach for which
Gatling was entitled to a remedy, Allegheny's assignment of error must be overruled.2
V. CONCLUSION
        {¶ 65} All of Gatling's assignments of error are overruled or mooted, with the
exception of the eleventh assignment of error, which is sustained. Allegheny's sole
assignment of error in its cross-appeal is overruled. We reverse and remand solely so that
trial court may apply the contractually agreed upon rate of interest to Gatling's damages

2 Allegheny makes no argument concerning whether the manifest weight of the evidence supported the
amount of damages calculated by the trial court. Allegheny's brief explicitly states that the error it asserts
is "purely a question of law." (Cross-Appellant's Brief at 24.)
No. 17AP-188                                                                        26

award. In all other respects, the judgment of the Franklin County Court of Common Pleas
is affirmed.
                     Judgment affirmed in part and reversed in part; cause remanded.
                       BROWN, P.J. and DORRIAN, J., concur.
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