White Current Corp. v. VELCO

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NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 
as well as formal revision before publication in the Vermont Reports.
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                                No. 90-083


White Current Corporation                    Supreme Court

                                             On Appeal from
     v.                                      Windsor Superior Court

Vermont Electric Cooperative, Inc.           September Term, 1991
and Vermont Electric Generation &
Transmission Cooperative, Inc., et al.


Alden T. Bryan, J.

William J. Donahue, White River Junction, and Roger Lamson, Hartland, for
  plaintiff-appellee

Michael L. Burak, David M. Hyman and Andrew H. Montroll of Burak &
  Anderson, Burlington, for defendants-appellants


PRESENT:  Allen, C.J., Gibson, Dooley and Morse, JJ., and Martin, Super. J.,
          Specially Assigned


     ALLEN, C.J.   This interlocutory appeal focuses on a letter of intent
executed by appellant electric cooperatives (Vermont Electric Cooperative,
Inc. and its subsidiary Vermont Electric Generation and Transmission
Cooperative, Inc.) and appellee White Current, Inc., a small power producer.
During the liability phase of a bifurcated trial, the jury found that the
letter constituted a binding contract for the purchase of electrical energy
which the cooperatives breached.  The court entered a partial final judgment
for White Current.
     After the court denied their motion for judgment notwithstanding the
verdict, the cooperatives filed a motion pursuant to V.R.A.P. 5(b) for
leave to file an interlocutory appeal.  The court granted the motion and
certified the following questions:
     (1)  Whether failure of all or any party to Exhibit No.
     4 [the letter of intent] to submit to the Public Service
     Board for approval, as required by General Order 45, an
     agreement contemplating the purchase and sale of
     electricity produced by a hydroelectric facility in
     Vermont rendered the agreement unenforceable.

     (2)  Considering the evidence in the light most favor-
     able to the Defendants, whether there was any evidence
     to fairly and reasonably support the jury's special
     verdict that the power sale agreement embodied in
     Exhibit No. 4 was subsequently orally modified.

     (3)  If the answer to Question No. 2 is affirmative,
     whether subsequent oral modification of Exhibit No. 4
     would render Exhibit No. 4 unenforceable as contrary to
     the Statute of Frauds.

The trial court found that these were controlling questions of law on which
there were substantial grounds for difference of opinion and that their
resolution would materially advance the termination of the litigation.  We
answer the first two questions in the negative, do not reach the third, and
remand the case for a trial on damages.
     The trial court opined that the interests of judicial economy would be
well served if the Supreme Court considered all appealable issues related to
the partial judgment.  At the cooperatives' request, the court certified an
additional eighteen questions without making any findings that they were
controlling, substantial or would advance the litigation.
     The cooperatives raise four main issues in their brief: (1) whether the
trial court properly submitted the letter of intent to the jury to determine
whether it was a binding contract, (2) whether the court properly excluded
expert testimony, (3) whether White Current's failure to file the letter
with the Vermont Public Service Board rendered it unenforceable, and (4)
whether the trial court properly considered the issue of oral modification
of the letter.  The first two were not properly certified by the trial
court, and we decline to address the first for reasons stated herein.  We
consider the second because it was contested below and properly preserved.
We consider the cooperatives' third and fourth arguments, but decline to
adopt their formulation of the oral modification issue and address that
issue as certified by the trial court.
                                   FACTS
     White Current, a qualifying small power producer under federal law,
began to develop a hydroelectric site on the Ottauquechee River in Hartland
in the late 1970s.  Soon after White Current commenced this project, the
cooperatives started their own larger project one mile upstream.  Fearing
the effects of proposed stream impoundments that would result from
construction at the cooperatives' site, White Current indicated its
intention to intervene in related regulatory proceedings.  Concerned with
delays that might result from such intervention, the cooperatives prepared
the letter of intent which was executed by the parties.
     The letter provided that the parties enter into a power sales
agreement, after obtaining the necessary regulatory approvals, according to
"essential terms" set forth in the letter.  The terms specified that White
Current would sell, for an initial period of ten years, the net output of
its planned 432-kilowatt generator to the cooperatives at a price equal to
85% of the cooperatives' generation costs at their upstream project.  The
letter contained specific price terms for the period before the
cooperatives' project was to become operative.  In the final paragraph of
the letter, the parties agreed to resolve any disputes concerning the impact
of the cooperatives' project on White Current's ability to generate power
exclusively through the Federal Energy Regulatory Commission (FERC).  The
letter was not filed with the Public Service Board (PSB) pursuant to its
General Order 45, which requires utilities to file all contracts, including
letters of intent, for the purchase or sale of electrical energy.
     One impact of the cooperatives' project was to cause intermittent
increases in stream flow, which White Current's planned 432-kilowatt
generator could not accommodate.  White Current therefore modified its
original plan and installed a second, larger generator designed to meet this
new condition.  Roger Lamson, White Current's principal, testified at trial
that the cooperatives agreed to purchase the output from that generator as
well, but that the agreement was never reduced to writing.  With both
generators on line, White Current operates at approximately 2000 kilowatts
and the project is now leased to a third party.
     After the parties signed the letter of intent, White Current intervened
in the cooperatives' FERC proceedings out of continuing concern for stream
flow coordination between the two projects.  Because of this intervention,
the cooperatives refused to execute a formal power sales agreement or
purchase any power generated by White Current.  White Current then sued the
cooperatives for breach of contract.
     The day before the trial on liability, the cooperatives announced their
intention to call expert witnesses to testify about the custom and usage of
letters of intent in the utility industry.  The trial court excluded this
testimony.  At the request of the parties, the court submitted written
interrogatories to the jury on the issue of whether the letter of intent was
a binding contract for the purchase of output from the 432-kilowatt gener-
ator.  The jury found that the letter represented a binding agreement which
the cooperatives had breached.  While the jury deliberated, the parties
agreed to submit additional interrogatories to the jury on whether the
contract had been modified or whether the parties entered into a separate
oral agreement for power from the second larger generator.  Counsel did not
present argument on this issue, and the court submitted it to the jury
without significant instruction.  The jury found an oral modification.
After reviewing the testimony, the court ruled that there was no evidence to
support this finding and entered a partial final judgment for White Current
on all questions of liability concerning the 432-kilowatt generator.
                                    I.
      Initially, we address the matter of questions and issues not properly
certified for review pursuant to V.R.A.P 5(b).  We do not agree with the
trial court's observation that judicial economy would be well served if we
were to consider all appealable issues at this time.  As we have earlier
noted:
       Interlocutory appeals are an exception to the normal
     restriction of appellate jurisdiction to the review of
     final judgments.  There are weighty considerations that
     support the finality requirement.  Piecemeal appellate
     review causes unnecessary delay and expense, and wastes
     scarce judicial resources.

In re Pyramid Co. of Burlington, 141 Vt. 294, 300, 449 A.2d 915, 918 (1982).
We have also recognized that although the criteria of V.R.A.P. 5(b) are
flexible and do not draw bright lines, neither do they give the judiciary
"license to abuse the interlocutory appeal mechanism."  Id. at 301-02, 449 A.2d  at 919.  As a general rule, "failure to satisfy any one of the V.R.A.P.
5(b) criteria . . . precludes certification and appellate decision."  Id. at
302, 449 A.2d  at 919.
     This Court has, on occasion, deviated from the general rule and decided
issues on interlocutory appeal where the trial court had not properly
certified the question but where the question is capable of resolution and
has been fully briefed and argued.  See Derosia v. Book Press, Inc., 148 Vt.
217, 218, 531 A.2d 905, 906 (1987).  We will also, on occasion, reach
issues fairly raised by the order appealed from.  See State v. Dreibelbis,
147 Vt. 98, 100, 511 A.2d 307, 308 (1986).  We decline, however, to
entertain an issue neither presented by properly certified questions nor
otherwise raised by the proceedings below or the order appealed from.
     The first issue raised by the cooperatives falls into this category.
They argue that the trial court erred by allowing the jury to construe the
letter of intent without first finding that the letter was ambiguous as a
matter of law.  This issue is not presented by the questions certified for
review upon which the trial court made appropriate findings warranting
interlocutory review.  Nor is it found in the additional questions, upon
which no findings were made.  The question was not raised in the coop-
eratives' motion for judgment notwithstanding the verdict and was not
addressed in the opinion and order of the court denying that motion.
Because the question was not properly certified and not otherwise raised by
the proceedings below, we decline to address it in this appeal.
                                    II.
     The cooperatives' second point is that the trial court improperly
excluded expert testimony on custom and usage in the utility industry.(FN1) 
cooperatives maintain that the court abused its discretion when it
excluded this testimony as a discovery sanction and on relevancy grounds.
We find no abuse of discretion here.
      Parties are required to respond to discovery requests concerning the
identity of experts expected to be called as witnesses at trial.  V.R.C.P.
26(b)(4)(A)(i).  Such responses must be seasonably supplemented to include
after-acquired information concerning the identity of experts.  V.R.C.P.
26(e)(1)(B).  Although V.R.C.P. 37, governing sanctions for discovery
abuses, does not specifically address a party's failure to seasonably
supplement discovery, the trial court has inherent authority to enforce
V.R.C.P. 26(e) by excluding evidence, granting a continuance, or by taking
other appropriate action.  Grimes v. Haslett, 641 P.2d 813, 822 (Alaska
1982) (citing 8 C. Wright & A. Miller, Federal Practice and Procedure {
2050, at 325 (1970)).  Absent an abuse of discretion, the trial court's use
of sanctions respecting Rule 26(e) will be upheld.  Id. at 822.  To support
their claim of abuse of discretion, the cooperatives must show that the
trial "court's discretion was either totally withheld or exercised on
grounds clearly untenable or unreasonable."  State v. Dorn, 145 Vt. 606,
616, 496 A.2d 451, 457 (1985).
     The court did not abuse its discretion here.  The cooperatives received
interrogatories seeking discovery of expert witnesses over one and one-half
years prior to trial, yet failed to identify their experts until the day
before trial.  It was reasonable for the court to find the cooperatives'
disclosure not seasonable and exclude their witnesses' testimony.  To permit
the witnesses to testify would frustrate the primary purpose of liberal
civil discovery rules: the prevention of surprise to one's opponent.  Davis
v. Marathon Oil Co., 528 F.2d 395, 403 (6th Cir. 1975), cert. denied, 429 U.S. 823 (1976).  Given the length of time available to the cooperatives to
prepare for trial, we can find no abuse of discretion in excluding experts
who were disclosed at the last minute.
     The cooperatives argue that the trial court's exclusion of their expert
witnesses was partially based on a ruling that such testimony would be
irrelevant.  The exclusion, however, was fully justified as a discovery
sanction and does not depend on the relevancy ruling.  Any prejudice to the
cooperatives resulted from their own failure to identify their expert
witnesses at an earlier time.  Furthermore, the cooperatives used in-house
experts to testify regarding the use of letters of intent in the utility
industry, minimizing potential prejudice.
                                   III.
     The first certified question asks whether the failure of any party to
file the letter of intent with the PSB pursuant to General Order 45
rendered the agreement unenforceable.  The cooperatives maintain that by
failing to file, White Current deprived the PSB and the cooperative's
ratepayers of important regulatory review.  While we agree that General
Order 45 provides the PSB with an important planning and review mechanism,
the responsibility for filing fell to the cooperatives, not White Current.
The cooperatives failed to fulfill this responsibility and may not assert
that failure as a basis for relief on appeal.  We therefore answer the first
question in the negative.
     General Order 45, (FN2) promulgated by the PSB in 1965, requires utilities
to file contracts, including letters of intent, for the purchase or sale of
electrical energy.  In its opinion issued in support of the order, the PSB
wrote that it sought to avoid "pockets of [power] poverty," to encourage
efficient and economical generation and transmission, to coordinate the
planning for new facilities, and to reserve the opportunity to counsel
modification of proposed contracts.  Public Service Board Opinion (September
29, 1965).  Filing pursuant to General Order 45 triggers the broad authority
and jurisdiction of the PSB conferred by 30 V.S.A. { 209.  Significantly,
General Order 45 contains no penalty provision for failure to follow its
provisions and does not state that an unfiled contract or letter of intent
is without validity.  Enforcement of General Order 45 occurs through 30
V.S.A. { 247 which provides for a $100 fine or 60 days imprisonment, or
both, for the violation of "any order, rule or regulation" adopted by the
PSB.
     White Current's argument that federal law preempts General Order 45 is
without merit.  In In re Vicon Recovery Systems, 153 Vt. 539, 543-47, 572 A.2d 1355, 1357-59 (1990), we directly held that the Public Utility
Regulatory Act of 1978 (PURPA) does not preempt the PSB's authority to
regulate contracts between utilities and small power producers.  In support
of its argument, White Current points to 18 CFR { 292.602(c)(1), which
exempts small power producers from "State law or regulation respecting:  (i)
[t]he rates of electric utilities; and (ii) [t]he financial and
organizational regulation of electric utilities."  This exemption, taken
almost verbatim from PURPA, (FN3) flows from Congress's belief that state and
federal regulation of alternative energy sources "imposed financial burdens
upon the nontraditional facilities and thus discouraged their development."
Federal Energy Regulatory Comm'n v. Mississippi, 456 U.S. 742, 751-52
(1982).
     This exemption, however, does not eliminate the requirement that the
letter be filed with the PSB pursuant to General Order 45, which does not
directly regulate the rates, finances or organization of utilities.  The
primary function of the order is to facilitate the planning and coordination
of the use of electricity in Vermont.  Furthermore, when promulgating {
292.602, FERC explained that "[t]hese rules, and the exemptions being
provided by these rules, are not intended to divest a State regulatory
agency of its authority under State law to review contracts for purchases as
part of its regulation of electric utilities."  45 Fed. Reg. 12233 (1980),
quoted in Vicon 153 Vt. at 545-046, 572 A.2d  at 1359.  Without authority to
review such contracts, Vermont would have no means of ensuring compliance
with PURPA or giving effect to FERC's regulations.  Additionally, the PSB's
commitment to comprehensive statewide planning and coordination would be
undermined by the exemption of contracts for the sale of power between small
power producers and electric utilities. (FN4) For these reasons, we hold that
the letter of intent should have been filed with the PSB as required by
General Order 45.
     We conclude that the cooperatives, not White Current, had
responsibility for filing the letter of intent with the PSB.  That letter
states that "VEG&T shall obtain all necessary regulatory and other approvals
to execute the power sales agreement."  Furthermore, General Order 45
expressly requires filing by "[e]ach private, municipal, and cooperative
utility."  (Emphasis added.)  This language places the responsibility for
filing the letter on the cooperatives, rather than on White Current, which
is a small power producer, not a utility.  We base our conclusion that White
Current is not a utility on the PURPA scheme and the definition of public
utilities found in the case law.
     PURPA treats small power producers in a manner that clearly distin-
guishes them from utilities.  PURPA relies on the definition of "small
power production facility" found in the Federal Power Act.  16 U.S.C. {
824a-3(j).  That Act defines a small power producer as a facility which
"produces electric energy solely by the use, as a primary energy source, of
biomass, waste, renewable resources, geothermal resources, or any
combination thereof" and "has a . . . capacity . . . not greater than 80
megawatts."  16 U.S.C. {796(17)(A).  Once recognized, these facilities enjoy
exemption from extensive federal and state utility regulation.  16 U.S.C. {
824a-3(e)(3).  Significantly, PURPA expressly precludes the sale of power by
a small power producer to the public.  All sales by such facilities, unlike
utilities, must be for resale.  16 U.S.C. { 824a-3(a).  As Congress enacted
PURPA, it recognized that

     small power producers are different from electric
     utilities, not being guaranteed a rate of return on
     their activities generally or on their activities vis a
     vis the sale of power to the utility and whose risk in
     proceeding forward in the cogeneration or small power
     production enterprise is not guaranteed to be recover-
     able.  H.R.Conf.Rep. No. 95-1750, pp. 97-98, U.S. Code
     Cong. & Admin. News, pp. 7831-7832 (1978).

Both the plain language of PURPA and Congressional intent support our
conclusion that White Current is not a utility.
     FERC regulations, promulgated to implement PURPA by providing detailed
mechanisms requiring the purchase of alternative energy, continue the
distinction between utilities and small power producers.  18 CFR {{ 292.101
- 292.602 (1991).  In its summary published with the regulations, FERC wrote
that a "small power producer which provided electricity to a utility's grid
ran the risk of being considered an electric utility and thus being subject
to State and Federal regulation as an electric utility."  45 Fed. Reg. 12215
(February 25, 1980).  This statement underscores the federal government's
intention to differentiate small power producers from utilities.
     Case law from other jurisdictions supports our conclusion that White
Current is not a utility.   The distinguishing characteristic of a utility
is its duty to serve the public without discrimination.  See City of Phoenix
v. Kasun, 54 Ariz. 470, 475, 97 P.2d 210, 212 (1939) (distinguishing
characteristic of public utility is devotion of private property to
efficient public use at proper rates); In re: Wind Power Pacific Investors
III, 67 Haw. 342, 345, 686 P.2d 831, 833-34 (1984) ("The term 'public
utility' implies a public use," the regulation of which ensures efficient,
nondiscriminatory service to public at fair rates.); Peoples Energy Corp. v.
Illinois Commerce Commission, 142 Ill. App. 3d. 917, 930, 492 N.E.2d 551,
561Ä62 (mere sale of electricity does not render seller a utility; public
utility implies public use and duty to serve the public without
discrimination); Marano v. Gibbs, 45 Ohio St. 3d 310, ___, 544 N.E.2d 635,
637 (1989) (public utility characterized by public concern).  The Alabama
Supreme Court has recognized that "not all purveyors of energy commodities
are 'public utilities,' even though they sell and distribute their products
under statutory regulation."  Coastal States Gas Transmission Co. v. Alabama
Public Service Commission, 524 So. 2d 357, 360 (Ala. 1988).  White Current
does not have a duty to serve the public.  As a small power producer, it
sells its product in bulk to one purchaser.  It is the purchaser that is
bound to provide indiscriminate service to the public at proper rates.  The
cooperative utilities, therefore, and not White Current, were responsible
for filing the letter of intent pursuant to General Order 45.
     The cooperatives' failure to file the letter of intent with the PSB
precludes them from now offering that failure as the basis for invalidating
an otherwise enforceable agreement.  "No [party] may take advantage of [its]
own wrong."  Glus v. Brooklyn Eastern District Terminal, 359 U.S. 231, 232
(1959).  Had the cooperatives met their regulatory duty by filing the
letter, the defect upon which they now rely would not exist.  They may not
avoid their obligations to White Current based on their own failure to
comply with General Order 45.  The failure of either party to file the
letter of intent with the PSB did not render that letter unenforceable.
     Our determination that White Current had no responsibility for filing
the letter of intent does not, as the cooperatives argue, impair the PSB's
ability to review contracts entered into by small power producers.  Because
PURPA requires that all such contracts be for the resale of electricity, (FN5)
the other party will always be a utility, which will distribute the
purchased power to the public.  Utilities have filing responsibility
pursuant to General Order 45 and, through their compliance, all contracts
involving small power producers in Vermont should continue to meet with PSB
review.
     The cooperatives' argument that the filing obligation was necessary in
this case to protect ratepayers merits little discussion.  We can find no
evidence that ratepayers needed protection here.  Indeed, the price at which
the cooperatives agreed to purchase White Current's output was only eighty-
five percent of their upstream generation costs.  The cooperatives rest
their argument on technical noncompliance with General Order 45 without
suggesting that their agreement with White Current was against the
ratepayers' interests.  This technical violation, that neither impacts the
dispute between the parties nor contravenes public policy, cannot be used by
the cooperatives to avoid their contractual obligations.  See McDonald v.
Roderick, No. 90-115, slip op. at 7-8 (Vt. January 3, 1992) (mere technical
violation of Real Estate Commission rules, that neither tainted agreement
nor made enforcement unfair, did not render otherwise valid broker's
agreement unenforcable).
                                    IV.
     The second certified question asks whether, considering the evidence in
the light most favorable to the cooperatives, there was any reasonable
support for the jury's finding of oral modification of the agreement
embodied in the letter. (FN6) We find no support for the jury's finding and
therefore answer this question in the negative.
     Although the letter of intent refers to the "net electrical output" of
White Current's project, it makes clear that the project referred to is the
432-kilowatt generator.  The cooperatives argue that a draft power sales
agreement, circulated by Lamson on behalf of White Current, is evidence of
the parties' intention to contract for the project's entire output.  The
parties, however, never executed that document.  Furthermore, Lamson's
testimony all pointed to a separate, oral agreement concerning the second
generator.  He discussed two distinct "problems," referring to the first and
second machines.  He clearly indicated that the cooperatives wanted a
separate agreement on the second machine, but were unwilling to commit that
agreement to writing at the time they executed the letter of intent.  There
is some evidence that the parties orally agreed that the cooperatives would
ultimately purchase the output from the second generator, but we find no
evidence to support the cooperative's contention that such agreement in any
way modified the agreement on the first generator.
     The trial court did not err, as the cooperatives contend, by rejecting
the jury's finding of oral modification, because the issue could be resolved
as a matter of law.   See McGlaughlin v. Fellows Gear Shaper Co., 786 F.2d 592, 599 (3d Cir. 1986) (trial court properly set aside jury finding of
assumption of risk as contrary to the evidence); Bethlehem Fabricators, Inc.
v. British Overseas Airways Corp., 434 F.2d 840, 843 n.2 (2d Cir. 1970) (a
court may disregard jury answers to questions that can be resolved as a
matter of law); Tedrowe v. Burlington Northern, Inc., 158 Ill.App. 3d 438,
444, 110 Ill.Dec. 621, ___, 511 N.E.2d 798, 802 (1987) (trial court may
disregard jury answer that is "contrary to the manifest weight of the
evidence").
     Because we answer the second certified question in the negative, we do
not reach the third.

     The first two certified questions are answered in the negative.  Cause
remanded.
                                        FOR THE COURT:




                                        Chief Justice




FN1.   We address this question, also not properly certified by the trial
court, because, unlike the first question, it was fairly raised by the
proceedings below.  The issue was contested at trial and properly preserved.

FN2.  The order states, in pertinent part:
     IT IS HEREBY ORDERED THAT:
     1.  Each private, municipal, and cooperative utility is requested and
required to give the Public Service Board notice in writing, at least
ninety (90) days in advance . . . of any of the following events:
     . . .
     e.  the execution of any contract for the purchase of capacity in, or
     energy from, any electrical generation or transmission facility for
     ultimate consumption within the State of Vermont;
     f.  the execution of any contract for the sale of capacity in, or
     energy from, any electrical generation or transmission facility located
     within the State of Vermont.
     . . .
     4.  For the purpose of this General Order, a letter of intent signed by
or on behalf of two or more parties is deemed to be contractual commitment.

FN3.  16 U.S.C. { 824a-3(e)(1).

FN4.  The PSB has, since the inception of this controversy, resolved all
doubt on this issue.  Rule 4.102(B), originally adopted in 1983, specifi-
cally requires the filing of these contracts pursuant to General Order 45.

FN5.  16 U.S.C. { 824a-3(a)(2).


FN6.  We decline to consider this issue as reformulated by the
cooperatives.  It is within the discretion of the trial court to state the
controlling question, and we will not review or rephrase the issue unless
clear error is shown.  Brown v. Tatro, 134 Vt. 248, 249-50, 356 A.2d 512,
513 (1976).