TXU Portfolio Management Company, LP v. FPL Energy, LLC
Dallas Court of Appeals, No. 05-08-01584-CV (August 18, 2016)
Justices Francis, Evans (Dissent), and Whitehill (Opinion)
The Dallas Court of Appeals disagreed. The Wind Farms’ delivery obligations were measured on an annual basis; so they did not breach their agreements until the year ended. Section 2.712(a) of the Texas Business and Commerce Code provides: “After a breach within the preceding section the buyer may ‘cover’ by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.” (Emphasis added.) An aggrieved buyer may either cover or sue for market damages, but not both. The trial court held that TXUPM’s cover activities prevented it from recovering market damages. But the Court of Appeals held that the plain language of the statute restricts “cover” to activities post-breach. In this case, TXUPM purchased additional electricity on a daily basis before the annual delivery obligations were technically breached. Because of the ephemeral nature of electricity, TXUPM did not—and indeed could not—purchase electricity after the breach to make up for the daily pre-breach shortfalls. So TXUPM’s purchases did not constitute cover, and it was entitled to the $8.9 million market damages found by the jury.
Justice Evans dissented, arguing the Court was bound to evaluate the evidence based on the definition of “cover” presented to the jury—regardless of what the “correct” definition may be. TXUPM objected to the definition at trial, but not on the grounds that it was an inaccurate statement of the law. Because the definition in the jury charge did not include the “after breach” language from the statute, Justice Evans concluded the evidence was sufficient to support the jury’s finding of cover.