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INTERNATIONAL PAPER COMPANY v. ANDROSCOGGIN ENERGY LLC

September 30, 2005.

INTERNATIONAL PAPER COMPANY, a New York corporation, Plaintiff,
v.
ANDROSCOGGIN ENERGY LLC, Delaware limited liability corporation, Defendant.



The opinion of the court was delivered by: CHARLES KOCORAS, District Judge

MEMORANDUM OPINION

This matter comes before the court on three post-trial motions: 1) Defendant Adroscoggin Energy LLC's ("AE") motion for judgment as a matter of law, or in the alternative, a remittitur or a new trial; 2) Plaintiff International Paper Company's ("IP") motion for an order awarding attorneys' fees, costs and expenses, and 3) IP's motion for an award of prejudgment interest. For the reasons set forth below, AE's motion is denied, IP's motion for award of attorneys' fees, costs, and expenses is denied in part and granted in part, and IP's motion for prejudgment interest is granted. BACKGROUND

The factual and procedural history of this case, leading up to the jury's verdict, is extensive and set forth in previously rendered opinions, so we only briefly recap the highlights here.

  IP has a mill in Androscoggin, Maine, that demands a source of electric power and steam for its operation. In 1996 and 1997 AE and IP negotiated a project (the "Project") in which AE would construct, own, operate, and maintain a facility at IP's mill for the purpose of producing electric power and steam for sale to IP and electric power for sale to others. During the negotiations, AE informed IP that it had ten-year contracts, copies of which were provided by AE to IP, with four different natural gas suppliers under which natural gas would be available at fixed prices with fixed escalations. One of these contracts, the Rio Alto Contract ("RAC"), was entered into between AE and Rio Alto Exploration, Ltd. ("Rio Alto"). The RAC provided AE with approximately one-third of the fixed priced natural gas to be used for the Project. The price of the gas was relatively low.

  On July 31, 1997, AE and IP entered into an Energy Services Agreement (the "ESA") under which AE would provide steam to IP for a period of twenty years. The price of the steam would be based, at least in part, on the average price of the quantity of the natural gas delivered pursuant to AE's fixed price, fixed escalation, and the contracts with the four natural gas suppliers.

  On March 26, 1998, AE sent a letter to Rio Alto acknowledging that it had failed to satisfy certain conditions precedent to the RAC and requesting an extension of time in which to comply. Rio Alto responded to the letter on April 7, 1998, stating that because of AE's noncompliance, Rio Alto was giving AE thirty days notice that it would terminate the RAC on May 8, 1998. At that time, however, Rio Alto informed AE that it could avoid termination of the RAC by exercising its contractual right to waive all remaining conditions precedent prior to May 8, 1998. AE initiated an arbitration proceeding against Rio Alto to enforce the RAC, but the arbitration panel unanimously held that the contract was validly terminated on May 8, 1998. AE allegedly did not inform IP of the RAC termination until August 31, 1998.

  On May 29, 1998, after the RAC was terminated but before IP learned of the termination, AE and IP executed Amendment No. 1 to the ESA ("Amended ESA"), which readopted the ESA as of that date.

  The ESA and, therefore, the Amended ESA contained representations by AE that there were no pending or threatened actions, suits, arbitrations or the like against AE that would materially and adversely affect AE. They also contained representations that AE was not in breach of any material contracts, and that AE would not terminate or modify its contracts with the natural gas suppliers without providing notice to, and seeking approval from, IP.

  Because of the termination of the RAC, AE has been and is likely to continue to purchase substitute gas at a higher price. Much of the increased price of gas available to AE has been passed on to IP in the form of increased steam prices. On October 10, 2000, IP filed suit against AE for breach of Section 2.02(f) of the ESA and negligent misrepresentation. On November 7, 2002, we granted IP partial summary judgment on its breach of contract claim, finding no issues of material fact existed as to whether AE breached the Amended ESA (specifically Section 2.02(f)), and that IP was entitled to judgment as a matter of law on that element. The court left issues of causation and damages to be determined by the jury.

  On November 3, 2004, a jury returned a verdict in favor of IP on its breach of contract claim and, as a result, awarded IP $41 million in damages. Following the trial, both parties filed post-trial motions; however, resolution of such was made difficult due to contemporaneous court proceedings.*fn1 We now address the still existing post-trial motions. LEGAL STANDARDS

  A. Judgment as a Matter of Law Pursuant to Rule 50(b)

  In deciding whether to, pursuant to Fed.R.Civ.Proc. 50(b), grant a motion for judgment as a matter of law, a court must determine "whether the evidence presented, combined with all reasonable inferences permissibly drawn therefrom, is sufficient to support the verdict when viewed in a light most favorable to the party to whom the motion is directed." Cygnar v. City of Chicago, 865 F.2d 827, 834 (7th Cir. 1989)). The court will grant the motion "only when there can be but one conclusion from the evidence." Emmel v. Coca-Cola Bottling Co. of Chicago, 95 F.3d 627, 636 (7th Cir. 1996). The court may not weigh the evidence, judge the credibility of the witnesses, or substitute its judgment of the facts. Cygnar v. City of Chicago, 865 F.2d at 834. "If the evidence, taken as a whole, provides a sufficient probative basis upon which a jury could reasonably reach a verdict, without speculation over legally unfounded claims, the motion should be denied." Cygnar, 865 F.2d at 835.

  B. Remittitur or New Trial Pursuant to Rule 59(a)

  A new trial may be granted on all or some of the issues that have been tried "for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States." Fed.R.Civ.Proc. 59(a). The court is granted wide discretion when it considers a motion for remittitur. See Medcom Holding Co. v. Baxter Travenol Lab., 106 F.3d 1388, 1397 (7th Cir. 1997) (motion for new trial on damages); Miksis v. Howard, 106 F.3d 754, 764 (7th Cir. 1997) (motion for new trial on damages and remittitur).

  When deciding whether a federal jury verdict is excessive, courts must apply a federal standard. Pincus v. Pabst Brewing, 893 F.2d 1544, 1554 (7th Cir. 1990). Under that standard, where an award is not rationally connected to the evidence, the court has the authority (1) to order a remittitur, or (2) to order a new trial ...


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