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Company Delivered Wrong Coal

Deborah Elkins//May 28, 2015

Company Delivered Wrong Coal

Deborah Elkins//May 28, 2015//

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A Richmond U.S. District Court grants summary judgment to plaintiff Dominion Virginia Power against defendant coal company for its delivery of 43,361 tons of coke breeze in breach of contracts to provide plaintiff Dominion Virginia Power with a specialized coal product to be used in “performance testing” of a newly built Virginia City Hybrid Energy Center; the direct damages that flow from the breach are supportable in the amount of $1,957,325.

Obtaining a certain kind of fuel for pre-Commercial Operations Date testing use was vital to Dominion’s ability to properly test VCHEC’s boilers and other equipment as part of the commission process for the new facility. Dominion was required to adhere to strict parameters in regard to the coal product it could burn as part of the performance testing phase of the commissioning process.

There is no genuine dispute of material fact regarding whether the delivery of coke breeze to the leased property was improper and thus a breach of contract. Defendant’s owner and president said after the coke breeze had been delivered and invoiced to Dominion that he was “nervous about Dominion not approving,” that he was “embarrassed” about what had happened, that he “did not request nor receive permission from Dominion to purchase and bill Dominion for the purchase of the coke breeze under the terms of the agreement,” and that he accepted “full responsibility for having improperly charged Dominion for the coke breeze” and that he realized he would “not be able to meet the delivery requirements without purchasing additional coal at his cost.” From this admission, one can reasonably conclude that coke breeze did not fit with the contract specifications and thus, fell outside the bounds of the contract specifications.

Coke breeze is not “run-of-mine” coal and therefore could not have met the specifications in the pre-COD confirmation. It is very clear to this court that there is no genuine issue of material fact regarding whether coke breeze was improperly delivered and thus placed defendant in breach of contract.

As a preliminary matter, all of defendant’s counterclaims are barred by the first-material-breach doctrine. Defendant cannot allege that Dominion ran afoul of any contract before defendant itself committed a material breach — the unauthorized delivery of coke breeze.

In addition, there is no genuine issue of material fact regarding whether Dominion properly rejected defendant’s unauthorized shipments of coke breeze. Here, the parties varied the UCC’s acceptance and rejection provisions by agreeing to a specific framework for rejection rights. Specifically, they agreed that Dominion could arrange to test any ready pile prepared for delivery to VCHEC and reject any ready pile that failed to meet specifications or was otherwise “unsuitable for use” at VCHEC.

After two years of good-faith efforts by the parties to resolve the instant matter without litigation, Dominion formally declared the occurrence of Events of Default and material breaches under the parties’ Master Agreement, the pre-COD Confirmation, the post-COD Confirmation and the Services Agreement. It cannot be disputed that defendant made no attempt to cure during the time it was contractually allotted subsequent to Dominion declaring defendant’s default.

Summary judgment for defendant.

Virginia Electric & Power Co. v. Bransen Energy Inc. (Spencer) No. 3:14cv538, USDC at Richmond, Va. VLW 015-3-205, 26 pp.

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