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Okaw Drainage District Of Champaign v. National Distillers And Chemical Corp.

September 27, 1996




Appeal from the United States District Court for the Central District of Illinois. No. 94 C 1076 Michael M. Mihm, Chief Judge.

Before EASTERBROOK, ROVNER and EVANS, Circuit Judges.

ROVNER, Circuit Judge.



In November 1951, defendant's predecessor, National Petro-Chemicals Corporation, *fn1 contracted with the Okaw Drainage District to maintain its main drainage ditch, a fourteen-mile segment of the Kaskaskia River. The contract was in effect between 1952 and 1987, when it was terminated at National's option. *fn2 The maintenance tasks that National undertook included dredging the bottom of the channel to remove accumulating sediment and clearing brush from along the river's banks. National's alleged failure to perform that work led the Drainage District to file this lawsuit in 1984, and the litigation has been pending ever since, with this its fourth time on appeal. *fn3 Our most recent remand of the case directed the district court to make factual findings and rule on both liability and damages with respect to the dredging portion of the contract. As for brush clearing, we found that the contract had been breached and directed the district court to consider only a damages award. See Okaw Drainage District v. National Distillers, 1993 WL 477915 (7th Cir. Nov. 18, 1993); Okaw Drainage District v. National Distillers, 1992 WL 43535 (7th Cir. Mar. 9, 1992).

Following remand, the district court conducted a three-day bench trial and subsequently issued a lengthy order outlining its findings of fact and conclusions of law. *fn4 The district court found that National had not met the contractual dredging requirements at any time during the entire 35 year duration of the agreement. Specifically, the court found that although National had performed some dredging in most of the river, it had never fully returned the river to its 1951 specifications, and had performed no dredging at all in the southern 10,000 feet of the river. In assessing damages, the district court held National responsible for the cost of returning the river to its original 1951 specifications, which meant removal of all sediment that exceeded the amount present in 1951. As for brush, the district court assessed damages based on the costs the District had actually incurred in clearing it.

On appeal, National does not contest the court's finding that it breached its duty to dredge, but challenges the district court's damages award. Because the district court has broad discretion in the imposition of contract damages, we review only for clear error. Lapinee Trade, Inc. v. Bood Rawd Brewery Co., Ltd., 91 F.3d 909, 911 (7th Cir. 1996) (" 'Because fixing a damages award is an exercise in fact finding, only those awards that are monstrously excessive, born of passion and prejudice or not rationally connected to the evidence may be altered.' ") (quoting Pincus v. Pabst Brewing Co., 893 F.2d 1544, 1554 (7th Cir. 1990)). We find no clear error in this instance. In light of our extensive history with this case, we will reiterate here only those facts that are relevant to the limited questions now before us.


As for dredging, the contract provided:

The dredging shall consist of the excavation of the bars, drifts and accumulated sediment and debris in the bottoms of the ditches, in order that the ditch bottoms may be restored to the established widths, depths and gradients as set forth and recited in the contract between the two districts establishing the joint drainage system. (Specifications IC.)

The 1951 contract required National to dredge the river at least once every ten years and envisioned that it would do so by way of a single, one-time operation. The 1965 amendment, however, provided National with another alternative; from that point forward, it could elect to clean the river bottom incrementally, "as a continuing yearly program of cleanout work," in lieu of a single operation. (Specifications IIA, amended Jan. 29, 1965.) Either way, National was required to achieve a net of one complete cleanout every ten years during the entire 1952 through 1987 period. In other words, the river had to be returned to the widths, depths and gradients set out in the original 1951 contract at least once every ten years.

The district court found that National had failed to restore the ditch to its 1951 specifications by way of either an ongoing yearly program or a single operation at any time during the entire 35 year period that it had contracted to do so. The court also found, and the parties do not dispute, that when the contract terminated in 1987, 104,000 cubic feet of sediment had accumulated in excess of the river's original widths, depths and gradients. As damages for the breach, the district court held National responsible for a one-time return of the ditch to its 1951 condition, which meant, with some minor exclusions, *fn5 removal of the entire 104,000 cubic feet of accumulated sediment.

National argues that the cost of a complete cleanout is excessive because of the option that arose in 1965 for it to conduct an ongoing rather than a one-time dredging operation. Although both systems required a complete cleanout once every ten years, National reasons that the river bottom would not have been completely cleared at any one time under the piecemeal system. In other words, although the contract required one complete cleanout by each of 1963, 1973, 1983, and, had the relationship continued, 1993, there was no time at which zero overall accumulation above the 1951 level was obligatory. National figures that its average yearly responsibility was to dredge 10 percent of the riverbed, and that in 1987, five years into the final ten year period, it was responsible for five such portions. National therefore believes it should pay for removing five times 10 percent, or 50 percent of the total 104,000 cubic feet of accumulation. And even that amount would be excessive, National contends, because it does not account for the inevitable yearly redeposition of sediment. Although it has provided no evidence to support this theory, National asks us to assume that all removed sediment is completely redeposited after ten years, and that this resettling occurs in equal yearly portions of 10 percent. National proposes a complicated calculation by which the 52,000 cubic feet should be further reduced to account for this yearly reaccumulation.

But, as justice and irony would have it, National's theory actually supports the district court's conclusion and undercuts National's own calculation. If, by one route or another, the ditch was to be returned to its original specifications once every ten years, and if National had remained current on that obligation, then its ongoing duty would have been met every ten years by simply removing all of the sediment that accumulated during that period. If every decade started with a clean slate, in other words, then that zero level of accumulation would be reaccomplished each time by merely removing any additional sediment that had been deposited during the most recent period. Now, according to National's theory, 10 percent of the sediment that would ultimately have accumulated in ten years was deposited each year. And, as National suggests we apportion its contractual obligation, it was responsible every year to remove 10 percent of the total sediment that would accumulate during ten years. But if 10 percent of the per decade total accumulated each year and 10 percent of National's per decade dredging obligation accrued each year, then National was at every point in time responsible for a net accumulation of zero. Thus, although only 50 percent of the ...

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