Opposition — Great Western Sugar Co. v. Davis Cattle Co.

Supreme Court, U. &

FILED

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MICHAEL RODAK, IR., CLERK

iN THE —

ME Cxurt of the United States

(JCTOBER TERM, 1976

- A

No. 76-782

THE GREAT WESTERN SUGAR COMPANY,

Petitioner,

v.

Davis CATTLE COMPANY, INC.,

Respondent.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Tenth Circuit

BRIEF FOR THE RESPONDENT

IN OPPOSITION

o

JEREMIAH C. COLLINS

JOHN W, VARDAMAN, JR.

Prerce O'DONNELL

WILLIAMS, CONNOLLY & CALIFANO

1000 Hill Building

Washington, D. C. 20006

Attorncys for Respondent

December 1976

WILSON » Eres PRINTING Co., ING. - Re 7-6002 + WASHINGTON, D. C, 20001

TABLE OF CONTENTS

TABLE OF AUTHORITIES ............

OPINIONS BELOW ...................

JURISDICTION ...

QUESTIONS PRESENTED ..............................

STATEMENT OF THE CASE..................

EEE A EAL ea YA ae

Statement of Facts

ARGUMENT -

CONCLUSION

.

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II

IN THE

TABLE OF AUTHORITIES

Cases: Page | Supreme Court of the United States

Bankers Trust Co. v. International Trust Co., 108 OcTOBER TERM, 1976

Colo. 15, 118 P.2d 656 (1941) .........00222020..... 5

Beckwith v. Talbot, 2 Colo. 639, aff’d, 95 U.S. 289 :

SITs aeia lcaa aah taba 5

Bishop Vv. Wood, 44 U.S.L.W. 2820 (U.S., June 10,

1978) Re Od aa PR ME Ree, 0 TE Sehr AD IO 7 No. 76-782

Browne V. Steck, 2 Colo. 70 (1878) ....00000000--eeee ee 5

Day & Zimmerman, Inc. v. Challoner, 423 U.S. 3

IN: thi i alba atl ilk 8 me

Deeb v. Canniff, 29 Colo. App. 510, 488 P.2d 98 THE GREAT WESTERN SUGAR COMPANY,

COG anrnesnssesssesssesmysnecennittnenacesonesnianaerecneestaliuenton 5 Petitioner,

Estate of Spiegel v. Commissioner, 335 U.S. 701 v.

RES RISES E el SEE a ee ee oO ee 6

Huddleston v. Dwyer, 322 U.S. 232 (1944) —.......... 7

Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. Davis CATTLE COMPANY, INC.,

I ree 2,7, 8 Respondent.

Lehman Brothers v. Schein, 416 U.S. 386 (1974)... 7

Martinelli v. Merchants Oil, Inc., 470 P.2d 55

CED SDS TWD wteicnennscncceinnisinnnnctiememenanieetiiteansean 5 On Petition for a Writ of Certiorari to the United States

McGregor v. State Mutual Life Assurance Co., Court of Appeals for the Tenth Circuit

8 FEE Ee ee

Meredith v. Winter Haven, 320 U.S. 228 (1945)...

Montgomery Vv. Tufford, 165 Colo. 18, 487 P.2d 36

5

7

Senn wexervontensoiserstedivsiesssermaieicrcessiero . BRIEF FOR THE RESPONDENT

5

Omaha & Grant Smelting and Ref. Co. v. Tabor,

te Oe SS FX are ee EN OPPOSETION

Statutes:

SE Si III rcsniestciaccetienihariinmabaiditipanasciatiiiae seeeneaatnas 2 | OPINIONS BELOW

Miscellaneous: The opinion of the court of appeals is unreported

Spiecker & Ruland, A Creditor’s Rights to Inter- and appears as Appendix B to the petition for certio-

est in Colorado, 35 U. Colo. L. Rev. 190 (1978).. 5

rari. The opinion of the district court is reported at

393 F. Supp. 1165 and appears as Appendix A to

the petition for certiorari.

2

JURISDICTION

The judgment of the court of appeals was entered

on September 20, 1976. A timely petition for rehear-

ing en banc was denied on October 26, 1976. The

petition for certiorari was filed on December 9, 1976.

This Court’s jurisdiction is invoked under 28 U.S.C.

§ 1254(1).

QUESTIONS PRESENTED

1. Whether in a breach of contract case brought

in the federal court on the basis of diversity of citi-

zenship, the district court and the court, of appeals

properly interpreted Colorado law in awarding dam-

ages.

2. Whether this Court should reconsider and re-

verse the longstanding doctrine of Klaxon Co. v.

Stentor Electric Mfg. Co., 313 U.S. 487 (1941).

STATEMENT OF THE CASE

Introduction

This breach of contract case was brought in the

United States District Court for Colorado as a di-

versity action. Applying Colorado law, the district

court found that petitioner, The Great Western

Sugar Company, had breached a contract and was

guilty of fraud in dealing with respondent, a sugar-

beet grower, and with members of a class represented

by respondent. The district court awarded damages

to the class and the court of appeals unanimously

affirmed. Neither court decided any question of

federal law.

Statement of Facts

The Great Western Sugar Company (“Company”)

is engaged in the manufacture and sale of sugar and

by-products from sugarbeets. The Company annually

contracts with farmers to grow sugarbeets for the

Company. The standard contract establishes a shar-

ing arrangement under which the amount a grower

receives for his beets is determined by the amount

of money the Company receives, over a twelve-month

period, from the sale of the sugar extracted from

the beets. Each year, the growers deliver their beets

to the Company in the fall. At that time, the Com-

pany is required under the contract to make an “ini-

tial” payment to the growers based upon what it

projects will be received from the sale of the sugar

over the next twelve months. At the end of the

twelve-month period, when all of the sugar has been

sold, the Company calculates the final amount due

the growers and pays them any amount due over

and above that received as an “initial” payment and

any interim payments.

This case involves the adequacy of the “initial”

payment made to the growers in the fall of 1974.

The contract provides that the “initial” payment

“shall be at the highest rate per ton that the

Company may deem to be justified taking into

consideration anticipated returns from the sale

of sugar and the sugar content of beets.” (Pet.

App. F, 75a).

4

On November 20, 1974, the Company made an

“initial” payment to the growers of $26.25 per ton

of beets. Under a complex formula contained in the

contract, that amount was the equivalent of a selling

price of $14.35 per hundred pounds of sugar. Re-

spondent sued claiming that the “initial” payment

was inadequate under the contract since, on the very

day of the payment, the Company was selling sugar

for more than $60 per hundred pounds and was esti-

mating a yearly average of between $40 to $53 per

hundred pounds.

After a non-jury trial, the district court found

that the Company breached its contract with the

growers. It found that the Company, in making the

“initial” payment, failed to consider “anticipated net

returns for the sale of sugar” as the contract re-

quired. As an additional ground, the district court

found that the Company “was guilty of fraud or

such gross mistake as necessarily implies bad faith

or a failure to exercise an honest judgment” in fixing

the amount of the “initial” payment. (Pet. App. A,

17a; see also 2la-22a). The district court then de-

termined that the Company underpaid the growers

by $74 million. By thus shortchanging the growers,

the Company deprived them of the use of that money

and, the evidence showed, saved itself 1114% interest

on the $74 million which it would have been required

to borrow. (Pet. App. A, 54a).

The district court, after an exhaustive review of

Colorado authorities, held that the growers were en-

5

titled to “moratory” interest, or interest as damages,

on the money wrongfully withheld. (Pet. App. A,

29a-5l1a). Under Colorado law, the proper measure

of damages was the “benefit” to the Company. Bank-

ers Trust Co. v. International Trust Co., 108 Colo.

15, 113 P.2d 656 (1941). (Pet. App. A, 52a-54a).

The court of appeals unanimously affirmed. (Pet.

App. B, 59a-69a).

ARGUMENT

1. The decision of the court of appeals, affirming

a decision “of purely local law by a [Colorado] fed-

eral judge of long experience,” McGregor v. State

Mutual Life Assurance Co., 315 U.S. 280, 281

(1942), was manifestly correct. The decisions below

were based upon a number of well-established Colo-

rado authorities which support the award of interest

as damages for money or property wrongfully with-

held.’

1 See cases discussed by the district court at Pet. App. A,

41a-5la and in particular Browne v. Steck 2 Colo. 70 (1873) :

Beckwith v. Talbot, 2 Colo. 639, aff'd, 95 U.S. 289 (1875);

Omaha & Grant Smelting and Ref. Co. v. Tabor, 13 Colo. 41,

21 P. 925 (1899); Bankers Trust Co. v. International Trust

Co., 108 Colo. 15, 113 P.2d 656 (1941); Deeb v. Canniff, 29

Colo. App. 510, 488 P.2d 93 (1971) ; Martinelli v. Merchants

Oil, Inc., 470 P.2d 55 (Colo. App. 1970); Montgomery Vv.

Tufford, 165 Colo. 18, 487 P.2d 36 (1968). See also Spiecker

and Ruland, A Creditor’s Right to Interest in Colorado, 35

U. Colo. L. Rev. 190, 200, 202 (1963).

Petitioner’s argument that those cases all involved liqui-

dated claims (Pet. 4, n. 4) and provide no support for the

award of damages here was properly rejected by both courts

below.

6

In affirming, the court of appeals said:

“The trial court * * * reviewed quite fully the

Colorado law on the subject and concluded that

Colorado had adopted the moratory interest con-

cept. We agree. The trial court relied heavily

on Bankers Trust Co. v. International Trust Co.,

113 P.2d 656 (Colo. 1941), which case was it-

self cited with approval by this court in Phillips

Petroleum Co. v. Oldland, 187 F.2d 780, cert.

denied, 342 U.S. 816 (1951). The trial court’s

reliance on these cases was in our view well

founded. We agree with the trial court that

Colorado law permits an award of moratory in-

terest in a situation of this type.” (Pet. App.

B, 68a).

In short, the decision below is based upon Colorado

authority as developed in the Colorado state courts

and as applied by the Tenth Circuit.’ It was rendered

by a tribunal with expertise in the laws of the states

comprising the Tenth Circuit. Estate of Spiegel v.

Commissioner, 335 U.S. 701, 707-708 (1949).° This

is hardly the exceptional case warranting a depar-

ture from this Court’s settled practice of “not re-

2 The Colorado cases relied on by petitioner (Pet. 5, nn. 5, 6)

are clearly inapposite. None involves a claim for interest as

damages for money due and owing but not paid. Furthermore,

those cases involved the availability of interest under a Colo-

rado statute, a basis for recovery not relied upon in this case.

* All three members of the court of appeals panel are mem-

bers of the Colorado bar. Two of the panel members, includ-

ing the author of the opinion, served as justices on the Colo-

rado Supreme Court.

7

view[ing] .. . the considered determination of ques-

tions of state law by the intermediate federal appel-

late courts.” Huddleston v. Dwyer, 322 U.S. 232, 237

(1944) (citation omitted); see also Bishop v. Wood,

44 U.S.L.W. 2820, 2821-22 & n.10 (U.S., June 10,

1976).

Petitioner’s argument that the court of appeals

should have exercised its discretion to certify the

issue of interest as damages to the Colorado Supreme

Court is frivolous. Although this issue was promi-

nent early in the proceedings in the district court

(see Pet. App. A, 30a), petitioner chose, at that time,

not to request that it be certified to the Colorado

Supreme Court. The belated effort to raise the issue

in the court of appeals was nothing more than an

attempt to delay the litigation and to shop for an-

other forum. That is ground, in and of itself, to

refuse certification. Meredith v. Winter Haven, 320

U.S. 228, 237 (1943); Lehman Brothers v. Schein,

416 U.S. 386, 395 (1974) (Rehnquist, J., concur-

ring). In any event, under Colorado Appellate Rule

21.1, a question of state law should be certified only

if “there is no controlling precedent in the decisions

of the [Colorado] Supreme Court.” As the opinions

below demonstrate, there were numerous “controlling

precedent[s]” to govern this case.

2. Petitioner’s invitation to the Court to recon-

sider the well-developed doctrine of Klaxon Co. v.

Stentor Electric Mfg. Co., 313 U.S. 487 (1941), is

equally frivolous. The issue was neither raised nor

decided below. Moreover, only last Term, this Court

reaffirmed Klaxon Co. in summarily reversing the

Fifth Circuit for departing from this “longstanding

decision”. Day & Zimmermann, Inc. v. Challoner,

423 U.S. 3, 4 (1975). Petitioner has offered no

persuasive reason to revisit Klaxon Co. 7

CONCLUSION

Petitioner has presented no reason why this Court

should grant certiorari to review the state law issues

decided in this breach of contract case. The petition

for a writ of certiorari should, therefore, be denied.

Respectfully submitted,

JEREMIAH C. COLLINS

JOHN W. VARDAMAN, JR.

PIERCE O’DONNELL

WILLIAMS, CONNOLLY & CALIFANO

1000 Hill Building

Washington, D. C. 20006

Attorneys for Respondent